UBS to Pay $23 Million over Charges by NY Attorney General of Abuse in Fee-based Accounts

UBS Financial Services, Inc. will pay $23.3 million to settle charges by New York’s Attorney General of “inappropriately steering” of brokerage customers into fee-based accounts. The NYAG said that under the agreement UBS will pay a $2 million fine and $21.3 million to approximately 3,000 customers it inappropriately placed in its InsightOne program.

According to the NYAG office, UBS charged one 91-year-old InsightOne client more than $35,000 over two years, although only four trades transpired in his account, meaning each trade cost him approximately $8,800. In another example, it says an 82-year-old paid approximately $24,000 in InsightOne fees one year in which only one transaction took place.

“UBS convinced customers to rely on its advice and then abused that trust,” said NYAG Andrew Cuomo. “This major settlement is a win for customers inappropriately pushed into unsuitable brokerage accounts and a warning to the entire industry that customers’ interests must come first.”

UBS denied any wrongdoing, said it only settled to avoid litigation and is “disappointed with the AG’s statement, which mischaracterizes the program and its operation.” Meanwhile, a NYAG spokeswoman said the regulator will continue to investigate fee-based accounts of UBS and other firms statewide.

Our firm has noted that, when fees are charged on each transaction, there is an incentive to “churn” accounts. More recently we have noted that, when accounts are switched to being charged a percentage of the assets in the account, the opposite is true. The number of transactions falls dramatically and many clients are completely ignored as fees are generated.

Shepherd Smith and Edwards represents institutional and individual investors nationwide in claims against members of the securities industry. We have served thousands of victims of misconduct by investment firms and/or their representatives. To learn whether our firm may be able to assist you, contact us to arrange a free consultation with one of our attorneys.

Related Web Resources:

Office of New York Attorney General Press Release: “Largest Ever Settlement In Fee-based Brokerage Account History”, with attached Complaint and Settlement Agreement