Investing

New Hampshire hits UBS with ARS charge

The firm is accused of misleading an issuer of student loans in that state by urging it to buy auction rate securities.

The New Hampshire Bureau of Securities Regulation is accusing a unit of Zurich, Switzerland-based UBS AG of fraud for misleading an issuer of student loans in that state by urging it to buy auction rate securities.
In a civil complaint filed today against New York-based UBS Securities LLC, the bureau accused the firm of knowing that the auction rate securities market was on the “verge of collapse” when it actively encouraged the Concord-based New Hampshire Higher Education Loan Corp. to purchase more of the securities.
UBS Securities is the longtime financial adviser and underwriter to New Hampshire Higher Education Loan Corp.
The bureau also alleged that UBS engaged in “dishonest and unethical” business practices and “violated its fiduciary duty as an underwriter, investment banker and broker-dealer” to New Hampshire Higher Education Loan Corp.
“By this action today, New Hampshire is one of the first states to focus on the consequences of failed auction markets to other parties besides investors, specifically regarding students,” Mark Connolly, New Hampshire director of securities regulation, said in a statement.
Responding to the complaint, Kris Kagel, a spokesman from UBS, said it is “frustrating that the New Hampshire Bureau of Securities Regulation has filed this claim against us, given that we have been in discussions with them and [New Hampshire Higher Education Loan Corp.] regarding the unique issues being raised by the state and have recently reached a comprehensive settlement with federal and state regulators to provide liquidity to all investors.”
“We will vigorously defend ourselves against this complaint as we believe that we worked in the best interests of our investor and issuer clients,” he said.
Last week, UBS agreed to buy back $18.6 billion in auction rate securities.