FINRA Fines UBS Financial Services $370,000 for Late Reporting, Failing to Report Broker Information
Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined UBS Financial Services, Inc. (UBS) $370,000, for making hundreds of late disclosures to FINRA's Central Registration Depository (CRD) of information about its brokers, including customer complaints, regulatory actions and criminal disclosures. Those reporting violations occurred over a three-year period, from January 2002 through December 2004.
The firm also failed to disclose a significant number of customer complaints and filed late and inaccurate notices concerning the termination of certain brokers' relationships with the firm.
"Investors, regulators and others rely heavily on the accuracy and completeness of the information in the CRD public reporting system - and, in turn, the integrity of that system depends on timely and accurate reporting by firms," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement.
As a practical matter, the violations may have hampered investors' ability to assess the background of certain brokers via BrokerCheck, FINRA's public disclosure program. They also may have compromised firms' ability to conduct background checks when making hiring decisions, reduced the ability of state securities regulators to review brokers' transfer applications and hindered FINRA from promptly investigating certain disclosure items.
Under FINRA rules, when a securities firm hires a broker it must ensure that information on the broker's registration application (Form U4) is updated and kept current in the CRD system. The firm must update that information whenever significant events occur, including regulatory actions against the broker, certain customer complaints, settlements involving the broker and certain criminal charges and convictions. Normally, those updates must be filed within 30 calendar days of the event. A reportable event involving statutory disqualification (often the result of a criminal conviction) must be disclosed to CRD within 10 calendar days. Firms also are required to notify FINRA within 30 calendar days of the termination of a registered person's association with a member firm by filing a notice known as Form U5. Firms also must notify FINRA within 30 calendar days of learning that information disclosed on a Form U5 filed for a broker has become inaccurate or is incomplete.
Regarding complaints, certain types of written, consumer-initiated, investment-related complaints made within the past 24 months must be disclosed on Forms U4 and/or U5. If a complaint alleges that a broker was involved in one or more sales practice violations and contains a claim for compensatory damages of $5,000 or more, it must be disclosed. Additionally, complaints alleging broker involvement in forgery, theft, misappropriation or conversion of funds or securities must also be disclosed.
In the UBS case, FINRA found that:
- From January 2002 through December 2004, UBS failed to report on time 559 required disclosures on Forms U4 and U5 relating to reportable customer complaints, regulatory actions and criminal disclosures, representing a non-compliance rate of over 18 percent. During the same time period, the firm failed to have supervisory systems and procedures in place reasonably designed to achieve compliance with reporting obligations for timely disclosures.
- From January 2002 through December 2004, UBS failed to disclose on Forms U4 and U5 at least 24 reportable written customer complaints that the firm had received.
- From January 2002 through mid-June 2003, in connection with retired registered persons who participated in UBS's Retiring Broker Program, the firm failed to file 31 termination notices on time (Forms U5), representing over 64 percent of such filings, and failed to report accurate termination dates on 32 Forms U5, representing over 66 percent of such filings.
As part of the settlement, UBS agreed to conduct an internal audit to evaluate the effectiveness of its system for timely compliance with certain Forms U4 and U5 reporting obligations. In addition, the firm agreed that an officer of the firm will certify that such audit has occurred and that recommendations from the audit have been or will be implemented.
In settling this matter, UBS neither admitted nor denied the allegations, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA BrokerCheck (formerly known as NASD BrokerCheck). FINRA makes BrokerCheck available at no charge. In 2006, members of the public used this service to conduct more than 4.7 million searches for existing brokers or firms and requested more than 207,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at www.finra.org/brokercheck. Investors can also access this service by calling (800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business with the U.S. public. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business - from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.finra.org.