UBS fined $11.2m for deceptive practices by advisors

They did not inform the clients of higher spread or improved interbank price of bonds.

The Monetary Authority of Singapore (MAS) imposed a $11.2m fine on UBS after its client advisors’ deceived customers on the prices of transactions for over-the-counter (OTC) bonds and structured products.

UBS admitted liability for its client advisors’ actions and has paid the civil penalty, the financial authority said in a press release.

UBS will also compensate all affected clients managed by UBS’ Singapore branch during the period of 2008 to 2017 as part of the penalty settlement.

“The conduct of UBS through its representatives is unacceptable and has no place in the financial services industry where trust and integrity are paramount. Our enforcement action and penalty took into account that UBS has undertaken to compensate affected clients and that the bank rendered full cooperation to MAS during the investigation,” said Ong Chong Tee, deputy managing director (financial supervision) of MAS.

In 2016, UBS reported to MAS that the bank had uncovered certain malpractices in Hong Kong and Singapore with regard to spread taking in OTC transactions.

The client advisors’ actions were possible because OTC product prices were not readily accessible to clients for them to verify against the transacted prices advised by UBS, noted MAS. The authority’s investigation also found internal system weaknesses which enabled the advisors to increase the spread post trade in the order management system.

As the post-trade contract notes sent to clients reflected only the final all-in price without a breakdown of the spread and interbank price, the clients were not informed of the higher spread and/or improved interbank price, according to MAS.

Investigations into the individuals involved in the misconduct are ongoing.

Photo courtesy of Allie Caulfield (Wikimedia Commons).

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