UBS Group AG UBS has been fined S$11.2 million ($8 million) by the Monetary Authority of Singapore (“MAS”) for deceiving clients over prices of bonds and other structured products.
In 2016, UBS Group had reported misconduct by its client advisors, particularly in Singapore and Hong Kong, to the MAS. The MAS conducted investigations post that.
The MAS recently said that the investigation revealed that the Swiss banks’ advisers had deceived clients or engaged in acts that were likely to deceive them.
The MAS stated in a news release yesterday that the misconduct relates to “the spreads and/or interbank prices for transactions in over-the-counter (OTC) bonds and structured products.”
It added, “When UBS executed OTC transactions requested by its clients, it did so with interbank counterparties and its practice was to charge a spread over the interbank price that it obtained from the counterparty.”
The investigation showed that the client advisers of UBS Group in Singapore either did not stick to the spread or interbank price, which was agreed by the clients, or overcharged them in excess of the fees sent out in the fee disclosure documents.
The MAS added, “The client advisers’ actions were possible because OTC product prices were not readily accessible to clients for them to verify against the transacted prices advised by UBS. In addition, internal system weaknesses enabled the client advisers to increase the spread post-trade in the order management system.”
Ong Chong Tee, the deputy managing director, financial supervision at MAS, said, “The conduct of UBS through its representatives is unacceptable and has no place in the financial services industry where trust and integrity are paramount.”
Nevertheless, the MAS stated that UBS Group fully cooperated with the investigation. Also, the bank has paid the fine and has taken measures to compensate all clients affected by the malpractice, which took place between 2008 and 2017.
UBS Group stated, “The behavior of the individuals involved is unacceptable and in strong contrast to the behavioral principles of our firm.”
As a Swiss systemically relevant bank, UBS Group is subject to heightened regulatory supervision. Because of rise in regulatory costs, its bottom line is expected to remain under pressure.
Notably, UBS Group is also required to pay about HK$400 million to the Hong Kong Securities and Futures Commission (“SFC”) for having overcharged up to 5,000 clients between 2008 and 2015.
Shares of the bank have lost 1.8% so far this year against 3.9% growth of the industry it belongs to.
Currently, UBS Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Increased scrutiny on global banks for their business practices has caused many of these firms to pay billions of dollars as fines and compensation to settle lawsuits and probes. Many investors lost their hard-earned money due to such business malpractices.
Last month, the U.S. Securities and Exchange Commission (“SEC”) said that two advisory units of Bank of Montreal BMO agreed to pay a penalty of nearly $38 million for overcharging clients.
Deutsche Bank AG DB recently agreed to pay $15 million in penalty to settle allegations that it exploited its market presence by overcharging clients for unsecured bonds issued by Fannie Mae and Freddie Mac between 2009 and 2016.
In June 2019, State Street Corporation STT agreed to pay $94.3 million for consistently overcharging mutual fund customers and other clients through concealed markups on back-office expenses for around 17 years.
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