But UBS is less exposed than its European rivals. Like Morgan Stanley and Goldman Sachs in the U.S., UBS has a relatively low level of credit risk. Thanks to its strategic focus on wealth management, riskier forms of lending are limited. Most of its loan book is secured: Over half are mortgages, most of them in Switzerland, with a 55% average loan-to-value ratio, and another third are so-called Lombard loans to wealth-management clients backed by securities, with a 50% average LTV.
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.
UBS to Pay $10 Million for Violating Rules Which Give Priority To Retail Investors in Municipal Offerings [SEC]
UBS to pay $10m to resolve SEC charges related to protecting retail investors [FN]
UBS’s Viral Immunity Isn’t Shared [WSJ]