UBS Reportedly Benches Fixed Income Head Amid Auction-Rate Probes

July 28, 2008 ( - Swiss bank UBS AG suspended the firm's head of fixed income in the U.S. and global head of municipal securities, David Shulman, according to a Wall Street Journal report citing unnamed sources.

The suspension comes as state and federal investigations have heated up probes into sales and marketing practices related to auction-rate securities by UBS and other Wall Street firms.

New York state Attorney General Andrew Cuomo has followed Massachusetts state securities officials by filing a civil-fraud lawsuit against UBS regarding its sales of auction-rate securities (See  NY Next to Sue UBS ). Neither has charged any individual, though Massachusetts named Shulman as a figure who helped to direct UBS’s efforts (See UBS Securities Faces Charges of Fraud by MA Authority ).

The Journal said Shulman is cooperating fully with UBS as it works through these matters, quoting Jonathan Gasthalter, a Shulman spokesman.

Both New York and Massachusetts suits allege that UBS and its executives knew the auction-rate securities market was collapsing last year and early this year and did not warn investors. Instead, the suits allege, the firm marketed the securities to institutional and retail investors through its sales forces to clean their own inventories of the investments.The Massachusetts regulatory action alleged Shulman sold much of his personal holdings in the instruments.

According to the Journal, a UBS spokeswoman said the firm doesn’t believe any of its employees acted illegally, but some might have used poor judgment. She also said UBS will defend itself against any charges.