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Singapore hands Swiss bank US$8.2 million penalty over misleading trades

2019-12-06 10:26 Friday


UBS has been dealt a significant blow by the Monetary Authority of Singapore (MAS) after the official anti-corruption and regulatory institution imposed a S$11.2 million (US$8.2 million) civil penalty on the Swiss bank over deceptive trades by its client advisers in the city.

In a statement earlier this month, MAS said UBS staff in Singapore had "engaged in acts that deceived, or were likely to deceive," clients about either the spreads or interbank prices for transactions related to over-the-counter (OTC) structured products and bonds.

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The MAS said that "when UBS executed OTC transactions requested by clients, it did so with interbank counterparties, and its practice was to charge a spread over the interbank price it obtained from the counterparty."

The statement by the Monetary Authority comes hot on the heels of news that the Hong Kong branch of UBS was fined HK$400 million (U.S.$ 51.09m) after a probe found the bank had been overcharging clients during a period of nearly 10 years.

In the island nation, UBS told the authority about the misconduct in 2016 after which MAS conducted an investigation.

In that case, it was revealed that client advisers did not adhere to the spread or interbank price understood by or agreed with or the client. They failed to disclose or only partly disclosed the discrepancy when a price improved, or overcharged clients more than the amount sent out in the documents detailing fee disclosure.

MAS reported: "The client advisers' actions were possible because OTC product prices weren't readily accessible to clients for them to verify against the transacted prices advised by UBS."

Additionally, internal system weaknesses enabled client advisers to increase the spread, post-trade, in the order management system. Anti-corruption compliancy investigations are ongoing into those involved in the misconduct, the MAS added.

"The conduct of UBS through its representatives is unacceptable and has no place in the financial services industry where trust and integrity are paramount. Our penalty and enforcement action took into account that the bank has undertaken to compensate affected clients and that it rendered full cooperation during the investigation," said Ong Chong Tee, Deputy Managing Director of MAS.

UBS will compensate all of the clients affected by the situation. The misconduct occurred from 2008 to 2017, MAS explained. The bank was asked to set up an independent party to check the effectiveness and scope of its improved measures. It's required to report future findings to MAS, according to the statement.

UBS has also paid the fine and taken steps to address its own system and manage lapses to "prevent arbitrary spread increases, and enhance price disclosures to clients".

In an announcement, the bank said the process has "finally resolved the matter that (UBS) had self-identified and reported to the regulators in Singapore and HK".

"The self-reporting included a plan to reimburse the affected wealth management clients fully and is limited to a very small percentage of all transactions processed through the bank's order processing system during the stated period.

The announcement concluded: "The behavior of the individuals involved is unacceptable and in strong contrast to the behavioral principles of our firm."


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