UBS agreed Thursday to pay $49.5 million to settle regulators’ claims that it failed to supervise stockbrokers who helped hedge fund clients engage in abusive trading of mutual funds at the expense of other shareholders.
The Swiss company will pay $24.8 million to New Jersey, $18 million to an investor-compensation fund and $5.8 million to the New York Stock Exchange, said New Jersey Atty. Gen. Peter Harvey and the NYSE.
“When a brokerage firm permits a hedge fund or any other market participant to trade deceptively and gain an unfair advantage over other investors, it has violated the trust that forms the foundation of our capital markets,” Richard Ketchum, the NYSE’s chief regulatory officer, said in a statement.
A UBS spokeswoman said the company neither admitted nor denied the claims. The costs of the settlement will be largely reflected as provisions in the firm’s fourth-quarter results, she said.
Regulators say UBS brokers in seven branches made at least 270,000 market-timing trades between October 2000 and December 2002, generating more than $18 million in revenue.
Market timing involves buying a fund’s shares and quickly selling them, reducing gains for long-term holders.