Securities Law Blog

UBS AG agreed to return more than $35 million it invested in auction-rate securities for 20 towns and public agencies in Massachusetts amid a state probe of how the debt was marketed. UBS misled the public officials by buying securities that weren't a ``permissible investment'' under the state's municipal finance law, according to Attorney General Martha Coakley. Authorities are still investigating whether the firm lied to the investors about the auction-rate obligations, which may result in penalties under the state's False Claims Act, Coakley said in a news release. Under the agreement with UBS, the 20 towns and agencies will avoid losses on the more than $35 million they invested, Coakley said. The Zurich-based investment bank on March 28 said it was cutting by 5 percent the value of auction-rate securities held for its customers to reflect the debt's diminished worth and illiquidity after the market for the bonds collapsed. ``UBS's action today will allow these entities to recover these frozen funds,'' Coakley said. Bank spokeswoman Karina Byrne said in a statement that the agreement applies ``only to the circumstances of this specific case under Massachusetts law.'' She declined to elaborate.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.