UK fines UBS $15 million for failings in AIG fund sale

UBS has been fined 9.45 million pounds by the Britain's financial regulator for exposing the customers to unacceptable risk when it sold an AIG investment fund in the latest blow to the Swiss bank's battered reputation.

The Financial Services Authority (FSA) said on Tuesday the bank also failed to deal properly with the customer complaints about the AIG fund sale.

UBS was fined $1.5 billion in December for its part in a global interest rate rigging scandal a year after the bank stunned markets with a $2.3 billion rogue-trading loss. The FSA said UBS sold the AIG Enhanced Variable Rate Fund - which aimed to improve returns by investing in assets backed by the securities and floating rate notes - to almost 2,000 high net worth customers between December 1, 2003 and September 15, 2008.

Initial investments were about 3.5 billion pounds. But as the share prices plunged during the 2007 and 2008 credit crisis, the customers rushed to withdraw cash prompting UBS to suspend the fund, leaving 565 UBS clients unable to access about 816 million pounds invested.

The FSA said UBS had mis-sold the fund to at least 19 customers and had mishandled at least 11 complaints. It estimates that the bill for compensating the customers will come to around 10 million pounds.

"UBS's conduct fell far short of what its customers deserved and what the FSA requires," said Tracey McDermott, head of the FSA's enforcement and financial crime division.

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