UBS ordered to pay $81m in damages over auction-rate security losses

6 August 2010

A division of UBS has been ordered to pay almost $81 million in damages to a cell-phone manufacturer which claimed it lost business when its assets were frozen in auction rate securities.

According to the Financial Industry Regulatory Authority (FINRA), UBS’s Financial Services unit has been ordered to pay Kajeet $80.8 million in compensation.

The firm, which manufactures cell phones for children, claims its business was damaged when funds in the securities could not be accessed.

Originally Kajeet had filed for damages of $110 million, although its investment at the time was $8 million.

However, Karina Byrne, spokesperson for UBS, said that the bank plans on contesting the decision.

Ms Byrne, who was quoted by Reuters, said: “We strongly disagree with the arbitration panel's decision on a legacy auction-rate matter and we will file a motion to overturn that decision.

“We believe the outcome is unwarranted under both the facts and the law."

During July FINRA penalised Deutsche Bank Securities $7.5 million for not providing investors with sufficient information surrounding mortgage delinquency rates.

The firm misreported rates of 16 investment products related to subprime mortgage-backed securities released during 2007.

By Jim Ottewill

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