UBS to Pay $10 Million for Violating Rules Which Give Priority To Retail Investors in Municipal Offerings

The Securities and Exchange Commission today announced that UBS Financial Services Inc. has agreed to pay more than $10 million to resolve charges that it circumvented the priority given to retail investors in certain municipal bond offerings. According to the SEC’s order, over a four-year period, UBS improperly allocated bonds intended for retail customers to parties known in the industry as “flippers,” who then immediately resold or “flipped” the bonds to other broker-dealers at a profit. The order finds that UBS registered representatives knew or should have known that flippers were not eligible for retail priority. In addition, the order finds that UBS registered representatives facilitated over 2,000 trades with flippers, which allowed UBS to obtain bonds for its own inventory, thereby circumventing the priority of orders set by the issuers and improperly obtaining a higher priority in the bond allocation process.