Helping Asian Wealth Management Communities interact

MAS Imposes Civil Penalty on UBS for Deceptive Trades

Nov 20, 2019 Hubbis

The Monetary Authority of Singapore has imposed a penalty of SNG11.2 million on UBS AG the acts of its client advisors, who’s actions deceived or were likely to deceive clients about the spreads and/or interbank prices for transactions in over-the-counter bonds and structured products.

The enforcement action by the Monetary Authority of Singapore (MAS) followed UBS AG (UBS)’ reporting of the misconduct to MAS, which were followed by the MAS’ subsequent investigations.

UBS has admitted liability for its client advisors' actions and paid MAS the civil penalty. As part of the civil penalty settlement, UBS is also to compensate all clients who have been affected by the deception by client advisors operating in UBS’ Singapore branch.

Ong Chong Tee, Deputy Managing Director, Financial Supervision, MAS, said that “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 enforcement action and penalty took into account that UBS has undertaken to compensate affected clients and that the bank rendered full cooperation to MAS during the investigation.”

When UBS executed over-the-counter (OTC) transactions requested by its clients, it did so with interbank counterparties, and its practice was to charge a spread over the interbank price that it obtained from the counterparty.

In 2016, UBS reported to MAS that the bank had uncovered certain malpractices in Hong Kong and Singapore with regard to spread taking in OTC transactions.

The investigation by the MAS revealed that client advisors either did not adhere to the spread or interbank price of a trade as agreed with or understood by the client; failed to disclose or made only partial disclosure to the client when there was a price improvement in the interbank price of a limit order; or overcharged excess of the fees set out in the bank’s fee disclosure documents to clients.

The client advisors’ actions were possible because OTC product prices were not readily accessible to clients for them to verify against the transacted prices advised by UBS, according to a press release by the MAS.

In addition, internal system weaknesses enabled the client advisors to increase the spread post-trade in the order management system. As the post-trade contract notes sent to clients reflected only the final all-in price without a breakdown of the spread and interbank price, the clients were not informed of the higher spread and/or improved interbank price.

The MAS has subsequently asked UBS to appoint an independent party to validate the adequacy and effectiveness of the bank’s remediation measures. UBS is required to report the reviewer’s findings to MAS.

MAS Imposes Civil Penalty on UBS for Deceptive Trades

Privacy Policy