NY Attorney General Eliot Spitzer, set to become governor of NY next month, sued the U.S. asset management arm of UBS yesterday, claiming it defrauded thousands of clients for "tens of millions of dollars" by placing them in inappropriate InsightOne fee-based accounts. The NY AG's office stated, "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." UBS however said it is disappointed with the suit, and published a statement saying, "UBS categorically denies that the program was part of a scheme to disadvantage clients, and intends to defend itself vigorously in this matter." A spokesman commented Spitzer "cherry picked incomplete information." UBS reported in its statement InsightOne accounts represented approx. 3.5% of its U.S. accounts. It also said in 2005, U.S. investors had more than $268b in fee-based accounts industry-wide.
• Sources: Press release, Bloomberg, Reuters, New York Times
• Related commentary: UBS, Credit Suisse Under SEC Investigation for Bonds Trading Irregularities
• Potentially impacted stocks and ETFs: UBS AG (UBS). Competitors: Ameriprise Financial (AMP), Charles Schwab (SCHW), Merrill Lynch (MER), Morgan Stanley (MS), Raymond James Financial (RJF). ETFs: Europe 2001 HOLDRs (EKH), streetTRACKS Dow Jones STOXX 50 (FEU), BLDRS Europe 100 ADR Index (ADRU)
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