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DOCKET NO. CO-13-8116-S
I. PRELIMINARY STATEMENT
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, UBS, through its execution of this Consent Order, voluntarily waives the following rights with respect to this Consent Order:
|1.||To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15(f) and 36b-27(a) of the Act and Section 36b-27(d)(2) of the Act and Section 4-177(a) of the General Statutes of Connecticut;|
|2.||To present evidence and argument and to otherwise avail itself of Sections 36b-15(f) and 36b-27(a) of the Act and Section 36b-27(d)(2) of the Act and Section 4-177c(a) of the General Statutes of Connecticut;|
|3.||To present its position in a hearing in which it is represented by counsel;|
|4.||To have a written record of the hearing made and a written decision issued by a hearing officer; and|
|5.||To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order;|
NOW THEREFORE, the Commissioner, as administrator of the Act and of the Regulations, hereby enters this Consent Order.
III. JURISDICTION AND CONSENT TO ENTRY OF CONSENT ORDER
|1.||UBS admits the jurisdiction of the Commissioner in this matter.|
|2.||Solely for the purpose of terminating the NASAA working group investigation, including the investigation by the Commissioner, and in settlement of the issues contained in this Consent Order, UBS, without admitting or denying the findings of fact or conclusions of law contained in this Consent Order, consents to the entry of this Consent Order by the Commissioner.|
IV. FINDINGS OF FACT
Background on Client Service Associates
|3.||The CSAs function as sales assistants and typically provide administrative and sales support to one or more of UBS’ Financial Advisors (“FAs”). There are different titles within the CSA position, including Client Service Associate, Registered Client Associate, and Senior Registered Client Service Associate.|
|4.||The responsibilities of CSAs specifically include, among other things:|
In addition to the responsibilities described above, and of particular significance to this Consent Order, some CSAs are permitted to accept orders from clients. As discussed below, UBS’ written policies and procedures require that any CSAs accepting client orders first obtain the necessary licenses and comply with self-regulatory organization and state registration requirements.
UBS issued a revised policy on registration requirements on March 28, 2007, which stated, inter alia, that managers are responsible for ensuring that all employees under their supervision are appropriately registered and licensed to perform the functions of their position.
|7.||During the period of 2004 to 2010, UBS employed, on average, approximately 2,277 CSAs per year.|
UBS Requires Registration of Client Service Associates
|8.||UBS requires CSAs to become properly registered, licensed, and appointed with the necessary self-regulatory organizations, state regulators, and business entities before taking solicited or unsolicited transaction orders from clients in securities or other financial products, receiving transaction-related compensation, or otherwise engaging in the offer or sale of securities or other financial products.|
|9.||UBS’ policies and procedures state that CSAs engaging in securities activities must register in, at a minimum, the state from which they conduct business (i.e. home state).|
|10.||In addition, UBS also required CSAs to register in states in which a CSA anticipated:|
Regulatory Investigation and Findings
|11.||In March 2010, state securities regulators initiated an investigation into the practices of UBS in connection with its CSA registrations.|
|12.||The multi-state investigation focused on systemic issues with UBS’ CSA registrations and related supervisory structure instead of attempting to identify each incidence of unregistered activity. Specifically, with respect to the order entry process, the investigation found:|
|13.||The multi-state investigation found that on certain occasions some UBS CSAs, while Series 7 registered and registered in one or more other states, accepted unsolicited orders to buy or sell securities from clients residing in Connecticut at a time when the CSAs were not appropriately registered in Connecticut.|
UBS Remedial Measures and Cooperation
|14.||In November 2010, after the initial inquiry by state securities regulators, UBS enhanced the COE System to automatically validate the registration of employees during the order entry process.|
|15.||Specifically, with respect to branch support staff (i.e. CSAs), employees are now required to indicate the person who directly accepted the order from a client by selecting “self” or “other” within the electronic ticket on the COE.|
|16.||If a CSA selects “self”, the COE validates whether the CSA who accepted the order is properly registered in the state where the client resides.|
|17.||If a CSA selects “other,” the CSA must provide identifying information for the person who accepted the order. The COE system subsequently validates whether the identified person who accepted the order is properly registered in the state where the client resides.|
|18.||If the identified person is not properly registered in the client’s state of residence, the order is routed to branch management who must ensure that a properly registered person accepts or confirms the order before execution.|
|19.||UBS provided timely responses and substantial cooperation in connection with the regulatory investigation.|
V. CONCLUSIONS OF LAW
The Commissioner has jurisdiction over this matter pursuant to the Act.
UBS’ failure to establish an adequate system to monitor the registration status of persons accepting client orders constitutes a violation of Section 36b-31-6f(b) of the Regulations under the Act which requires each registered broker-dealer to establish, enforce and maintain a system for supervising the activities of its agents and Connecticut office operations that is reasonably designed to achieve compliance with applicable securities laws and regulations.
|3.||UBS’ maintenance of order tickets which do not accurately identify the person who accepted client orders constitutes a violation of Section 36b-14(a)(2) of the Act which requires every registered broker-dealer to make, keep and preserve such accounts, correspondence, memoranda, papers, books and other records as the Securities and Exchange Commission requires for the duration prescribed by the SEC.|
|4.||UBS’ acceptance of orders for purchases and sales of securities from clients residing in Connecticut through CSAs not registered in Connecticut contravened Section 36b-6(b) of the Act.|
|.||The Commissioner finds the following relief appropriate and in the public interest.|
VI. CONSENT ORDER
On the basis of the Findings of Fact, Conclusions of Law, and USB’ consent to the entry of this Consent Order,
IT IS HEREBY ORDERED THAT:
This Consent Order concludes the investigation by the Commissioner and any other action that the Commissioner could commence under the Act and the Regulations against UBS and its officers, directors and present or former employees as such action relates to the allegations of unregistered Connecticut activity described herein by CSAs of UBS and UBS’s supervision of CSA registrations during the period from January 1, 2004 through December 31, 2010.
This Consent Order is entered into solely for the purpose of resolving the above referenced multi-state investigation, and is not intended to be used for any other purpose.
UBS shall refrain from violating Sections 36b-6(b) and 36b-14(a)(2) of the Act and Section 36b-31-6f(b) of the Regulations, and shall comply with the Act, its regulations and any order under the Act.
Within ten (10) days after the entry of this Consent Order by the Commissioner, UBS shall remit by bank check payable to “Treasurer, State of Connecticut” the total sum of One Hundred Fourteen Thousand Four Hundred Fifty Seven and 79/100 Dollars ($114,457.79), $50,000 of which shall constitute an administrative fine and $64,457.79 of which shall represent reimbursement for past due agent registration fees for the period from 2004 to 2010.
For any person or entity not a party to this Consent Order, this Consent Order does not limit or create any private rights or remedies against UBS, nor does it limit or create liability of UBS, or limit or create defenses of UBS, to any claims.
This Consent Order is not intended by the Commissioner to subject any Covered Person (as defined below) to any disqualifications under the laws of the United States, any state, the District of Columbia, Puerto Rico, or the U.S. Virgin Islands, or under the rules or regulations of any securities or commodities regulator or self-regulatory organization, including, without limitation, any disqualification from relying upon state or federal registration exemptions or safe harbor provisions. “Covered Person” means UBS or any of its affiliates and their current or former officers or former officers, directors, employees, or other persons that could otherwise be disqualified as a result of the State Orders (as defined below).
|7.||This Consent Order and the order of any other State in any proceeding related to UBS’ agreement to resolve the above referenced multi-state investigation (collectively, the “State Orders”) shall not disqualify any Covered Person, as defined in paragraph 6. above, from any business that they otherwise are qualified, licensed or permitted to perform under applicable securities laws or regulations of Connecticut and any disqualifications from relying upon this state’s registration exemptions or safe harbor provisions that arise from the State Orders are hereby waived.|
|8.||This Consent Order shall be binding upon UBS and its successors and assigns as well as the successors and assigns of relevant affiliates with respect to all conduct subject to the provisions above and all future obligations, responsibilities, undertakings, commitments, limitations, restrictions, events, and conditions.|
NOW THEREFORE, the Commissioner enters the following:
|1.||The Findings of Fact, Conclusions of Law and Consent Order set forth above, be and are hereby entered;|
|2.||Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against UBS based upon a violation of this Consent Order or based upon the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by UBS and reflected herein are subsequently discovered to be untrue; and|
|3.||This Consent Order shall become final when entered.|
|So ordered at Hartford, Connecticut,||_______/s/_________|
|this 15th day of October 2013.||Howard F. Pitkin|
CONSENT TO ENTRY OF ORDER
I, Ilene Marquardt, state on behalf of UBS Financial Services Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of UBS Financial Services Inc.; that UBS Financial Services Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that UBS Financial Services Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein. UBS Financial Services Inc. further agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any state, federal or local tax for any administrative monetary penalty that UBS Financial Services Inc. is obligated to pay pursuant to the foregoing Consent Order.
|UBS Financial Services Inc.|
On this 8th day of October 2013, personally appeared Ilene Marquardt, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that she was authorized to execute the same on behalf of UBS Financial Services Inc., a corporation, and acknowledged the same to be her free act and deed, before me.
My Commission Expires: 6-14-15