Komfie Manalo, Opalesque Asia: The Securities and Exchange Commission said that UBS AG has agreed to
pay $17.5 million in penalties to settle charges that its two advisory
firms allegedly failed to inform clients about the change in investment
strategy by a fund focused on distressed debt.
In a statement, the SEC said the settlement arose from a
change in investment strategy at UBS Willow Fund LLC, a closed-end fund
the UBS units advised, amid the 2008 financial crisis. It added that
more than $13 million will be returned to harmed investors.
"Advisers must provide investors and fund boards with accurate
information about a fund’s investment strategy," said Julie M. Riewe,
co-chief of the SEC Enforcement Division’s Asset Management Unit. "Here
UBS Willow Management completely reversed the fund’s strategy – from
investing in distressed debt to betting against it – without adequately
disclosing the change."
The SEC added that UBS Willow Management, a joint venture between UBS
Fund Advisor and an external portfolio manager, marketed the UBS Willow
Fund as one that primarily invested in distressed debt, a strategy
predicated on the debt increasing in value. From 2000 through 2008, UBS
Willow Management invested the fund’s assets consistent with the
strategy described in the offering and marketing materials.
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