UBS to Pay $3.5 Million for Overcharging Charities, Retirement Plans
The Securities and Exchange Commission has censured UBS Financial Services and ordered it to pay a $3.5 million penalty for failing to waive upfront sales charges and selling more expensive fund share classes to eligible retirement and charitable accounts.
From January 2010 to June 2015, UBS sold $18.5 million of Class A mutual fund shares with upfront sales charges, contingent deferred sales commissions and higher ongoing fees and expenses than some 15,250 accounts were entitled to receive, according to a cease-and-desist order published on the regulator’s enforcement website.
In addition to failing to offer no-load and Class R share classes and having inadequate systems and controls to ensure they were offered, UBS failed to disclose that it had a “conflict of interest” in selling the more expensive share classes, according to the order.
“Eligible customers did not have sufficient information to understand that UBS had a conflict of interest resulting from compensation it received for selling the more expensive share classes,” the order said.
The penalty, which follows UBS’s attempt to reimburse customers the overcharges and interest, is the latest in a series of penalties exercised by U.S. regulators against large and small brokerage firms over mutual fund charges.
UBS itself was fined $250,000 in 2016 by the Financial Industry Regulatory Authority for failing to waive sales charges for clients who were eligible for “right of reinstatement” refunds on mutual fund Class A share purchases. That followed earlier fines from Finra of $250,000 in 2008 and $4.6 million in 2004 for failing, respectively, to waive in-fund family charges and failing to give breakpoint discounts.
In the current proceeding, UBS agreed to make further efforts to contact some 970 clients that have not yet cashed or deposited $617,000 of repayments that it has attempted to distribute, according to the agreement.
A spokeswoman for UBS, which accepted the order but did not admit or deny its findings, did not return a request for comment.