UBS Settles Charges Over Supervisory Failure For $500,000

by Glen Shapiro, LawAndTax-News.com, New York

22 August 2003

UBS, which acquired financial services firm, PaineWebber in 2000, on Wednesday agreed to settle with the US Securities and Exchange Commission (SEC) over the activities of a stockbroker who looted millions of dollars from PaineWebber customer accounts in the mid- to late 1990s.

Former broker, Enrique E. Perusquia pleaded guilty to securities fraud last year, and is currently serving a six and a half year sentence for making unauthorised and often highly speculative trades with customer funds in exchange for kickbacks, according to an Associated Press report.

The SEC revealed that Perusquia conducted the trades in question through an omnibus account in the name of a Swiss bank, instructing the bank on how to assign the trades to customer accounts at the close of business each day.

The regulator observed that as a result of this set up, the broker's supervisors were unable to obtain information about the clients and their assets, and could not examine the suitability of the trading practices being employed on their behalf.

Speaking to the AP, Helane L. Morrison, district administrator of the SEC's San Francisco office announced that:

'Brokerage firms have a duty to adopt procedures reasonably designed to prevent fraudulent conduct by their employees. PaineWebber's failure to adopt such procedures made it easier for Perusquia to carry out his fraud.'

The firm agreed to pay the $500,000 fine, but has neither admitted nor denied wrongdoing.

This follows a similar settlement between the SG Cowen Securities Corp., Lehman Brothers and the SEC. The firms recently agreed to pay a combined $7.5 million in settlement over the activities of rogue stockbroker, Frank Gruttadauria.

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