UBS Brokerage Account Fee Fraud

The office of New York Attorney General Eliot Spitzer has filed suit against UBS Financial Services, Inc. (UBS), charging that the company defrauded thousands of customers through its InsightOne brokerage program.

The lawsuit details how UBS moved inappropriate clients from regular brokerage accounts into InsightOne, despite higher costs for these investors, by falsely promoting InsightOne as providing personalized advice and other financial planning services.

InsightOne charged its brokerage customers an asset-based fee instead of per-transaction commissions. Asset-based fee accounts are inappropriate for investors who rarely trade securities or hold significant amounts of cash, no-load mutual funds, or other similar assets.

The brokerage account fee fraud lawsuit says that UBS:

--Lured unsuitable investors with false promises, including the promise of an advice-based account.

--Created a conflict of interest for its brokers by giving them a financial incentive to enroll and keep investors in InsightOne even when the program was ill-suited.

--Kept many unsuitable investors in InsightOne by encouraging UBS brokers to churn their InsightOne accounts.

UBS brokers complained to their supervisors about the unethical practices but were met with deaf or threatening ears. Fee based or not, increasing transactions for the sake of increasing transactions (not for the benefit of the client) is called churning. The investor never wins with churning.

As a result of UBS fraudulent conduct, InsightOne customers paid tens of millions of dollars more in InsightOne fees than they would have paid in traditional brokerage account commissions.

The civil lawsuit, filed in New York Supreme Court charges UBS with violations of state anti-fraud laws, as well as common law fraud and breaches of fiduciary duty. The complaint seeks from UBS disgorgement, damages and restitution, as well as injunctive relief.

UBS Brokerage Account Fee Fraud - http://www.consumeraffairs.com/news04/2006/12/ny_ubs.html