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Alternative Market Briefing

UBS agrees to pay $17.5m to settle charges from failure to disclose fund’s strategy change

Tuesday, October 20, 2015

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.

Changes in investment strategy must be adequately disclo......................

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