FINRA Fines UBS $2M For Continued Muni Violations

The Financial Industry Regulatory Authority (FINRA) fined UBS Financial Services with $2M for continually failing to inform clients about changes in the tax-exempt status of their municipal securities.

UBS Failed to Notify Clients About Municipal Securities Shorts

FINRA said UBS did not inform customers about shorts created in municipal securities they purchased when investors borrowed them and sold them on the market. Even though the 'securities' were in short positions, the company took responsibility for paying interest instead of the municipalities. 

According to FINRA, people buy municipal securities because of the tax-exempt, but that only applies when the municipality pays the interest. Interest paid by the firm, because of a short, is indeed subject to taxation. 

UBS Fined Several Times for Violations 

However, this does not come as a surprise as FINRA has fined UBS on several occasions. Three years ago, the firm was ordered to pay $750,000 for alleged supervisory failures. Between 2015-2017, nearly 5,000 customers were affected — wrongfully believing (amongst other things) the interest payments they were receiving on municipal bonds they owned were tax-exempt.

Overall, the firm is responsible for failing to create adequate procedures to train employees and not notifying supervisors of the fatal consequences of not addressing the short positions promptly. 

In consequence, UBS will not only pay over $2M in fines but will also need to compensate customers who were affected — and pay the IRS for any federal income tax increases that came as a result of its conduct.

Speak with an Investment Fraud Attorney

Dimond Kaplan & Rothstein, P.A. has vast experience in representing investors who have sustained losses due to the negligence or misconduct of their broker and/or brokerage firm, including cases involving complex options strategies. We will aggressively pursue claims against UBS to recover your Yield Enhancement Strategy investment losses.

If you are looking for an investment fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. represent individual and institutional investors who have lost money as a result of investment fraud or stockbroker misconduct. We’ve recovered more than $100 million in assets lost to investment fraud and stockbroker misconduct.

Contact Dimond Kaplan & Rothstein Today

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