FINRA Fines UBS $100k Over Transaction Reporting Failures

BySamson Ononeme

Jan 8, 2024 ,
UBS Fined By FINRA Over Five-Year Bond Trade Disclosure Gap

Key Insights

  • UBS pays $100k fine for lacking municipal trade fee transparency from 2016-2021
  • Failed to properly flag 91k no-commission bond deals missing non-transaction cost marker
  • Regulator cites deficient reporting system design and supervision around key data points

NEW YORK – Swiss banking giant UBS will pay a $100,000 penalty plus accept regulatory censure to settle charges around deficient municipal securities disclosures and oversight shortfalls tied to required non-transaction fee markers.

In an agreement announced on Monday, the Financial Industry Regulatory Authority (FINRA) outlined reporting infrastructure weaknesses at UBS Financial Services subsidiaries lasting over five years despite heightened post-2008 scrutiny around fee transparency.

Five Years of Fee Disclosures Missing at UBS

FINRA said transaction data for some 91,059 municipal bond deals between July 2016 and July 2021 erroneously excluded mandatory flags indicating client charges beyond simple trade commissions. Rules require such tags even for no-fee trades.

The lapse related to non-managed accounts where UBS failed to embed compliance logic during original electronic reporting system design, later moving to address coding gaps once detected in mid-2021.

But FINRA flagged more than four preceding years of missing oversight controls around the Non-Transaction-Based Compensation (NTBC) indicator as violations of fair pricing governance duties.

The firm’s supervisory system was not reasonably designed to ensure compliance with real-time transaction reporting requirements because the firm lacked any supervisory reviews or written procedures relating to the NTBC indicator, FINRA outlined.

UBS did finally establish quarterly checks in late 2023 to audit NTBC trade tagging accuracy after fiery disputes around hidden Wall Street fees spread in recent years.

As well as the monetary penalty, the firm accepted FINRA censure of its historical surveillance shortfalls even as it moves to strengthen warning systems guarding against recurrence.

Experts say the episode underscores industry hazards around evermore complex disclosure systems, but shows regulators will act firmly against foot-dragging to fix blindspots.

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