SOURCE: Klayman & Toskes

June 27, 2008 09:43 ET

Civil Fraud Charges Levied Against UBS Reinforce Investor Claims That They Were Misled When Purchasing Auction Rate Securities, According to The Securities Law Firm of Klayman & Toskes

NEW YORK, NY--(Marketwire - June 27, 2008) - The Securities Law Firm of Klayman & Toskes, P.A. ( said today that civil fraud charges filed by Massachusetts' Secretary of State against UBS Securities, LLC and UBS Financial Services (NYSE: UBS), Docket No. 2008-0045, reinforce and substantiate investor claims that UBS misled investors in connection with its marketing and sales of Auction Rate Securities. According to the Complaint, UBS "stepped up its sales campaign to investors even as, and because, large corporate cash managers were shunning auction-rate securities and its own inventory was ballooning." The Complaint also cites several internal UBS e-mails which were created during the third and fourth quarters of 2007 that reveal the firm's angst regarding the auction rate market, and which conclude that "the auction process is flawed." Nevertheless, UBS continued to promote the sale of Auction Rate Securities to its customers without disclosing the deteriorating state of the auction rate market.

Presently, Klayman & Toskes continues to file claims against major Wall Street brokerage firms regarding unsuitable recommendations in Auction Rate Securities. On the heels of the regulator's lawsuit, Klayman & Toskes expects claims against UBS to increase substantially.

Since the Auction Rate Securities crisis began in February of 2008, Klayman & Toskes has received numerous inquiries from investors who have claimed that UBS advised them that Auction Rate Securities were "Cash Alternatives," and went so far as to list Auction Rate Securities in the "Cash Alternatives" section of investors' monthly UBS account statements. In that regard, investors believed that their Auction Rate Securities carried little to no risk. According to internal UBS documentation released by Massachusetts' Secretary of State, UBS stated, "As you develop a portfolio strategy to work toward your long-term goals, the need to fund short-term financial goals may arise. For this reason, you should consider maintaining a portion of your portfolio in liquid assets. Liquidity refers to the ability to quickly convert investments into cash when you need it. Cash alternatives... include: Auction Preferred Stock (APS) [and] Auction Rate Certificates (ARCs)."

While UBS dumped its Auction Rate Securities inventory on investors during the latter part of 2007, it appears that the brokerage firm was aware that the market for these securities was in trouble. This material fact went undisclosed to many UBS customers. By late 2007, in order to reduce the firm's significant inventory of Auction Rate Securities, David Schulman, UBS' chief of municipal bonds and fixed income, initiated an aggressive sales and marketing campaign which included conference calls with brokers to promote the securities. Such conference calls were held 13 times from August 22, 2007 until auctions for the investments began to fail in mass proportions, in February of 2008. According to Massachusetts' Complaint, however, while Mr. Schulman was encouraging investors to buy Auction Rate Securities, he was selling. On August 22, 2007, Schulman reportedly sold a large portion of his own holdings in Auction Rate Securities.

Klayman & Toskes continues to investigate the sales practices of several Wall Street brokerage firms in connection with their marketing of Auction Rate Securities, including UBS. Klayman & Toskes' investigation is focused on investors who purchased Auction Rate Securities as well as individuals who have information regarding the sales practices/marketing of Auction Rate Securities by Wall Street brokerage firms.

The attorneys at the Law Firm of Klayman & Toskes are dedicated to aggressively pursuing claims on behalf of investors who purchased Auction Rate Securities from UBS. Klayman & Toskes, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms. If you wish to discuss this announcement or have information relevant to our claims, please contact Steven D. Toskes, Esquire or Jahan K. Manasseh, Esquire of Klayman & Toskes, P.A., at 888-997-9956, or visit us on the web at


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  • Contact:
    Steven D. Toskes, Esquire
    Jahan K. Manasseh, Esquire
    Klayman & Toskes, P.A.