UBS AG announced today that it reached a settlement with the Securities and Exchange Commission (SEC), the US Internal Revenue Service (IRS), US Department of Justice (DOJ) and a group of State Attorneys General to resolve those entities’ investigations into the conduct of certain former employees in the firm’s former municipal reinvestment and derivatives group from 2001 to 2006.
UBS is pleased to have resolved this matter with its regulators. The underlying transactions were entered into in a business that no longer exists at UBS and involved employees who are no longer with the firm. The full settlement amount was provisioned in prior quarters and will have no effect on the firm’s future financial results or on any current business of UBS.
The total amount of the settlement is $160.3 million. Under the terms of the settlements, UBS will pay a net amount of $140.3 million as follows: $22.3 million to the IRS; $47.2 million to the SEC, $20 million of which also will be credited to the states; and an additional $70.8 million to the states.
UBS cooperated fully in this investigation into alleged coordination among market participants in the industry. UBS does not endorse, ratify or condone anticompetitive activity or other violations of law, and UBS policies (both currently and during the period in question) expressly prohibit such conduct.
THE IRS AGREEMENT
Under the IRS Agreement, UBS agreed to issue the following statement:
UBS AG also announced today that it has agreed to a settlement with the Internal Revenue Service under which UBS AG will pay $22,300,000 for certain regulatory violations of the Internal Revenue Code committed in connection with UBS's role in providing, bidding on, or brokering certain guaranteed investment contracts, swaps and other contracts with the issuers of municipal bonds, or with entities which borrowed the proceeds of such bonds from the issuer thereof or otherwise were the beneficiaries of such bonds. Such issuers are primarily state and local governments but also include school districts, universities, hospitals and charitable organizations.
This settlement agreement with the Internal Revenue Service is entered with UBS AG to resolve violations of the Internal Revenue Code resulting from participation in anti-competitive practices, such as bid-rigging, in the municipal market in connection with certain investment contracts and derivative transactions.
With respect to compliance by the affected issuers with the arbitrage requirements of Section 148 of the Internal Revenue Code, under the settlement agreement the municipal investment and swap contracts associated with a State or local bond during the period 1999 through 2006 are deemed to have been entered into on terms which represent the fair market value of such contracts.