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UBS Financial Services: Do You Know Your Brokers’ Conflicts of Interest?

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author
March 11, 2023 at 1:39am

UBS Financial Services (CRD #: 8174) is a registered broker-dealer and an investment advisory firm. Its headquarters are located in Weehawken, New Jersey.

The firm has a global presence and also does business under the following names:

  • Paine, Webber, Jackson & Curtis Inc.
  • Wealth Management USA
  • UBS Painewebber
  • UBS Financial Services
  • Painewebber Incorporated

UBS Financial Services has a noteworthy 909 disclosures on its record, 469 of which are regulatory events and 435 are arbitration awards. There are also five civil events. Investors win arbitration awards through FINRA arbitration, the go-to dispute resolution service for defrauded investors.

Investors should know the details of the allegations against the firm, as well as the conflicts of interest brokers should disclose to their customers. If you have lost money in your brokerage account, you should consider if a potential conflict of interest or a violation of FINRA rules was to blame.

Can I Sue UBS Financial Services?

Yes, but instead of suing in civil court, most investors will go through FINRA arbitration. Investment contracts typically include pre-dispute arbitration clauses. FINRA arbitration is designed to take less time and cost less than a civil case. Securities attorneys can help you navigate the process and secure a fair settlement.  

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.

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Regulatory Actions Filed Against UBS Financial Services

Investors should review the latest regulatory actions filed against UBS Financial Services, including the millions of dollars in penalties and settlements.

UBS Financial Services Consents to $125 Million Fine Following SEC Allegations

On September 27, 2022, UBS Financial Services settled a case with the SEC for $125,000,000 following allegations that the firm had failed to maintain accurate records of its brokers’ and supervisors’ communications, in violation of Section 17(A) of the Exchange Act. The SEC uncovered systemic use of off-channel communications–on platforms like WhatsApp–to communicate about business. Firms are supposed to maintain their communications via official channels so that regulators can review and ensure compliance with securities laws.

You can read a copy of the Cease-and-Desist Order to learn more about the undertakings and internal audit UBS Financial Services agreed to as part of the terms of the settlement.

The Commodity Futures Trading Commission fined UBS Financial Services $75,000,000 for the same alleged misconduct, also on September 27, 2022.

Cease-and-Desist Order Failed to Identify Red Flags of Identity Theft

According to a Cease-and-Desist Order issued July 27, 2022, the SEC alleged that UBS Financial Services failed to maintain a written identity theft prevention program, as required by Rule 201 of Regulation S-ID. The identity theft prevention program UBS had in place failed to identify relevant red flags and respond appropriately to red flags to stop identity theft.

UBS paid a settlement of $925,000.

SEC Fine of $17.4 Million Following Yield Enhancement Strategy (YES) Allegations

UBS became the subject of an SEC Cease-and-Desist on June 29, 2022, that alleged that UBS did not adequately supervise or train UBS advisors who recommended a financial product called Yield Enhancement Strategy (YES). YES is a complex investment strategy involving options trading. Unfortunately for investors, YES risked significant losses for investors following periods of market volatility.

UBS consented to return $5.8 million to investors as well as an interest payment of $1.4 million. The firm also agreed to pay a civil penalty of $17.4 million.

Alleged Failure to Supervise 529 Plan Recommendations

On December 2021, UBS consented to findings from the Financial Industry Regulatory Authority (FINRA) that it failed to supervise its 529 Plan investment recommendations. 529 Plans are designed to encourage saving for a beneficiary’s college savings. They come with different share classes that feature different fee structures. Brokers should always consider fees when recommending a change in share class for a 529 Plan. FINRA alleges that UBS brokers failed to recommend the most cost-effective share plans to their customers.

UBS agreed to repay over $4 million to investors. You can read the Acceptance, Waiver, and Consent agreement here.

View from the street of the One World Trade Center

UBS Financial Products

UBS offers customers the following investments and financial products:

Some of these products, especially alternative investments and margin accounts, come with significant risk to the investor. If a UBS broker recommended one of these investments and you suffered losses, you may have a case for a securities lawyer.

Brokerage Account Fees

UBS charges certain fees for brokerage accounts. Brokerage account fees have no minimums, but accounts that fall below certain amounts will pay additional annual account maintenance fees. Investors should note that these fees apply regardless of whether their investments generate a return.

There are separate fees for advisory accounts, which advisors can review in the Form CRS. The main fees associated with advisory accounts are wrap fees, which are calculated as a percentage of the assets you have invested with the firm.

Investors with brokerage accounts at UBS should be on the lookout for the following fees:

 

  • Annual Account Maintenance Fees
  • Transaction-Based Fees: These include commissions for your brokers, which may be discounted.
  • Administrative Fees: Processing and handling fees for trades, wire fees, transfer fees, and bank charges.
  • Margin Account Fees: Margin accounts allow investors to borrow money from the brokerage firm to buy more securities. These types of loan compound the possibility for losses.
  • Expense Ratios: These apply to investments like mutual funds, ETFs, variable annuities, and alternative investments.
  • Surrender Charges: Certain investments may charge a surrender charge if you sell within a specified time frame.

Conflicts of Interest

UBS discloses its conflicts of interest in its Customer Relationship Summary (Form CRS). According to the Form CRS, UBS recommends that investors ask their brokers about conflicts of interest: “You should understand and ask us about these conflicts, because they can affect the recommendations and investment advice we provide you.”

Investors can read a more complete list of their conflicts of interest in the brochure entitled, “Your Relationship with UBS.”

Frequency of Transactions

Because of the transaction-based fees, brokers have an incentive to encourage you to trade more often.

Proprietary Investments

UBS Financial Services earns higher fees for products the firm sponsors. The same applies to products from UBS affiliates.

Third-Party Affiliate Payments

UBS Financial services may receive payments for certain products they recommend, due to a relationship UBS has with a third party.

Revenue Sharing

UBS earns a portion of revenue from certain products, typically mutual funds and variable annuities.

Principal Trading

UBS earns compensation when they buy securities from you or sell securities from their own inventory. The firm typically charges a commission or imposes a “mark down” of the price of the securities they buy from you.

Sweep Program for Uninvested Cash Balances

The sweep program presents a conflict of interest because UBS uses the money to generate revenue with their affiliates. Cash balances may earn a lower rate of return than they might if they were otherwise invested.

UBS Financial Services Brokers

UBS Financial Services employs financial professionals that are often registered as both brokers and investment advisers. (Read about the differences here.)

These brokers are currently registered with UBS Financial Services or have registered with UBS in the past 10 years:

 

If you lost money working with an UBS, your next step should be to contact a securities lawyer for a free case evaluation.

What Should I Do If I Lost Money Working with a UBS Brokers?

Call (877) 600-0098, email info@kurtalawfirm.com, or contact us via our Live Chat.