Broker-Dealer Litigation - Greenberg Traurig LLP

SEC v. UBS Financial Services Inc., 2011 SEC LEXIS 1555, SEC Litigation Release No. 21956
(May 4, 2011)
On May 4, 2011, the SEC filed a complaint against UBS Financial Services Inc. (“UBS”)
in the U.S. District Court for the District of New Jersey alleging that UBS engaged in various
fraudulent bidding practices in connection with at least 100 municipal bond transactions.
According to the Commission, UBS made fraudulent misrepresentations and omissions to
various municipalities and their agents. Specifically, UBS illegally won bids as a provider of
reinvestment products, rigged bids for the benefit of other providers while acting as a bidding
agent for the municipalities, and facilitated the payment of improper, undisclosed amounts to
other bidding agents. As a result of this conduct, UBS generated millions of dollars in ill-gotten
gains and threatened the tax status of over $16.5 billion of underlying municipal securities.
Without admitting or denying these allegations, UBS has consented to entry of a final
judgment enjoining it from violations of Section 15(c) of the Securities Exchange Act of 1934
and has agreed to pay a penalty of $32.5 million and disgorgement of $9,606,543 with
prejudgment interest of $5,100,637. The settlement was approved by the court on May 6, 2011.
SEC v. J.P. Morgan Securities LLC, 2011 SEC LEXIS 2329, SEC Litigation Release No. 22031
(July 7, 2011)
On July 7, 2011, the SEC filed a complaint against J.P. Morgan Securities LLC (“J.P.
Morgan”) in the U.S. District Court for the District of New Jersey alleging that J.P. Morgan
engaged in various fraudulent bidding practices in connection with at least 93 municipal bond
reinvestment transactions. According to the Commission, through misrepresentations and
omissions, J.P. Morgan, acting as an agent for its affiliated commercial bank, affected the prices
municipalities paid for reinvestment products and deprived municipalities the presumption that
the reinvestment products were purchased at fair value. Specifically, J.P. Morgan engaged in
“last looks,” a process by which it won bids because it obtained information from bidding agents
about other bids, “set-ups,” a process by which it won bids because the bidding agent
deliberately obtained non-winning bids from other providers, and rigging bids for other providers
by deliberately submitting non-winning bids. As a result of this conduct, J.P. Morgan generated
millions of dollars in ill-gotten gains and threatened the tax status of billions of dollars of
underlying municipal securities.
Without admitting or denying these allegations, J.P. Morgan has consented to entry of a
final judgment enjoining it from violations of Section 15(c)(1)(A) of the Securities Exchange Act
of 1934 and has agreed to pay a penalty of $32.5 million and disgorgement of $11,065,969 with
prejudgment interest of $7,620,380. The settlement was approved by the court on July 8, 2011.
J.P. Morgan and its affiliates have also agreed to pay $177 million to settle parallel charges
brought by other federal and state authorities.
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