The Connecticut Department of Banking made official April 16 its $5.5 million penalty against UBS AG after employees used “market timing” techniques to increase returns from mutual funds between 2000 and 2002.
The Switzerland-based investment services company employs more than 4,000 people in Stamford.
Much of the UBS penalty will be used to provide financial instruction in Connecticut schools, universities and prisons.
Some of the incidents occurred after mutual funds in Connecticut and elsewhere warned UBS to curtail the practice, and after the company adopted a policy to do so.
Market timing is the practice of trading in and out of mutual funds in order to exploit inefficiencies in mutual fund pricing, and capture a profit at the expense of long-term investors.
In 2006, the company paid $25 million to the state of New Jersey to settle market timing charges, the largest sum the state has ever collected in a securities case. UBS also paid $25 million to the New York Stock Exchange in the New Jersey case.
Under Connecticut law, in some instances state regulators can revoke the licenses of broker-dealers that engage in market timing.
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