(RTTNews) - UBS Financial Services Inc., a unit of UBS AG (UBS), has agreed to pay more than $10 million to settle charges that it circumvented the priority given to retail investors in certain municipal bond offerings, the Securities and Exchange Commission said in a statement on Monday.
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 SEC order found that UBS registered representatives knew or should have known that flippers were not eligible for retail priority. The order also found 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.
The SEC previously brought charges of municipal bond offering "flipping" and retail order period abuses in August 2018, in December 2018, in September 2019, and in April 2020.
The SEC also instituted settled proceedings against UBS registered representatives William Costas and John Marvin. The SEC's order finds that Costas and Marvin negligently submitted retail orders for municipal bonds on behalf of their flipper customers and that Costas also helped UBS bond traders improperly obtain bonds for UBS's own inventory through his flipper customer.
UBS and the two representatives did not admit or deny the agency's findings, the SEC said.
Costas agreed to pay disgorgement and prejudgment interest totaling $16,585 and a civil penalty of $25,000, and Marvin agreed to pay disgorgement and prejudgment interest totaling $27,966 and a civil penalty of $25,000. Both consented to a 12-month limitation on trading negotiated new issue municipal securities.
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