SINGAPORE - The Monetary Authority of Singapore (MAS) has imposed a $11.2 million civil penalty on UBS over deceptive trades by the bank's client advisers in Singapore.
UBS client advisers had "engaged in acts that deceived or were likely to deceive" clients about the spreads and/or interbank prices for transactions in over-the-counter (OTC) bonds and structured products, said MAS in a statement on Thursday (Nov 14).
The enforcement action relates to transactions executed from 2014 onwards in Singapore-managed accounts in UBS. The acts of the bank's client advisers had contravened section 201(b) of the Securities and Futures Act (SFA).
When UBS executed OTC transactions requested by its clients, the bank 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.
Subsequent investigations by MAS showed that in numerous transactions, UBS client advisers 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, and/or overcharged the client in excess of the fees set out in the bank's fee disclosure documents to clients.
The client advisers' actions were possible because OTC product prices were not readily accessible to clients for them to verify against the transacted prices advised by UBS, said MAS.
The regulator noted that internal system weaknesses also enabled UBS client advisers 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.
UBS has admitted liability for its client advisers' actions and paid the civil penalty. The bank will also compensate all affected clients managed by its Singapore branch during the period 2008 to 2017.
"The conduct of UBS through its representatives is unacceptable and has no place in the financial services industry where trust and integrity are paramount," said Mr Ong Chong Tee, MAS deputy managing director for financial supervision.
Investigations into the individuals involved in the misconduct are ongoing.
In a press statement, a UBS spokesman said this "finally resolves" the issue that the bank had "self-identified and reported" to the regulators in Hong Kong and Singapore.
"The self-reporting included a plan to fully reimburse the affected wealth management clients and is limited to a very small percentage of all transactions processed through the bank's order processing system during this period. The behaviour of the individuals involved is unacceptable and in strong contrast to the behavioural principles of our firm."
