Swiss banking giant, UBS was involved in possible misconduct in the Auction Rate Securities (ARS) market which collapsed with the crash of many financial institutions in 2007 and 2008.
Auction rate securities were touted as short-term, highly liquid investments that could be purchased with excess cash by corporations, financial funds and wealthy individuals. They were securities which were backed by debts such as student loans, corporate debt and municipalities and were sold at auctions held by large banks such as CitiGroup, Merrill-Lynch and UBS.
During 2007/08, many ARS auctions failed, and holders were unable to sell, which led to the collapse of the market. Many investors suffered serious financial harm and sued banks, including UBS, when brokers who supported the market simultaneously withdrew their support, compromising the auction rate market’s investors’ ability to cash out of their investments.