Investors Sue UBS Over Misconduct Related To Subprime And Other Credit Market Woes
The credit crunch precipitated by the subprime securities fiasco seems to just keep getting worse for UBS. Not only has the firm suffered billions of dollars in losses from the subprime debacle and been identified as a focus of criminal and administrative investigations relating to mispricing and misvaluing subprime securities, among other things, but individual lawsuits and arbitration claims against the firm are mounting.
Last week, HSH Nordbank AG, a German bank, sued UBS claiming that UBS had dumped troubled mortgage investments on HSH and other investors and had mismanaged a CDO named North Street 2002-4. The lawsuit was described in an article entitled “Did UBS Dump Toxic Assets” in The Wall Street Journal on February 27, 2008. UBS was one of the biggest players in the CDO market.
Several days later, UBS was sued for misrepresenting auction-rate securities to investors. Among other things, UBS was accused of misrepresenting to investors that auction rate securities were “liquid assets” that were the equivalent of “cash” or “cash alternatives.” The auction-rate securities markets have recently been rocked by numerous auction failures that have prevented investors from being able to withdraw their funds. These securities are certainly not cash equivalents.
UBS is also under investigation for its actions related to various private investment funds that it established to invest in subprime securities and similar exotic investments. Many of these funds have sustained significant losses in recent months.
