SEC Division of Corporation Finance no-action letter: UBS AG

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

DIVISION OF
CORPORATION FINANCE
August 6, 2013
Mr. Robert J. Giuffra, Jr
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Re: In the Matter of UBS Securities LLC (NY-8553) UBS AG – Waiver Request of Ineligible Issuer Status under Rule 405 of the Securities Act Dear Mr. Giuffra:
This is in response to your letter dated July 2, 2013, written on behalf of UBS AG (Company) and its subsidiary, UBS Securities LLC (UBS Securities), and constituting an application for relief from the Company being considered an “ineligible issuer” under Rule 405(1)(vi) of the Securities Act of 1933 (Securities Act). The Company requests relief from being considered an “ineligible issuer” under Rule 405, due to the entry on August 6, 2013, of a Commission Order (Order) pursuant to Section 8A of the Securities Act of 1933 (Securities Act), Section 15(b)(4) of the Securities Exchange Act of 1934, and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, naming UBS Securities as a respondent. The Order, among other things, requires that UBS Securities cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act. Based on the facts and representations in your letter, and assuming the Company and UBS Securities comply with the Order, the Commission, pursuant to delegated authority has determined that the Company has made a showing of good cause under Rule 405(2) and that the Company will not be considered an ineligible issuer by reason of the entry of the Order. Accordingly, the Company’s application for relief is hereby granted, and the effectiveness of such relief is as of the date of the entry of the Order. Any different facts from those represented or non-compliance with the Order might require us to reach a different conclusion. Sincerely, /s/ Mary Kosterlitz Chief, Office of Enforcement Liaison Division of Corporation Finance

CONFIDENTIAL TREATMENT REQUESTED
SULLIVAN & CROMWELL LLP BY UBS SECURITIES LLC
TELEPHONE: 1-212-558-4000
FACSIMILE: 1-2 2-558-3588 125 f?lj~ r;;f/iy.ee£ WWW.SULLCROM,COM o/rwlcJ ._AP!/10004-24.98 A!.JG.ELES •

• PARIS
  MELBOURNE • SYDNEY
  Rule 405 of the Securities Act, 17 C.F.R. ~230.405 July 2, 2013 By Federal Express and E-mail Mary Kosterlitz, Esq., Chief of the Office of Enforcement Liaison, Division of Corporation Finance, U.S. Securities and Exchange Commission, 100 F Street, N.E.,

Washington, D.C. 20549.

Re: In the Matter of ACA ABS 2007-2 (File No. NY-8553) Dear Ms. Kosterlitz:
I write on behalf of my clients, UBS Securities LLC ("UBS Securities") and UBS AG. UBS Securities is an indirect, wholly owned subsidiary ofUBS AG and the settling party in the above-captioned administrative proceeding (the "Proceeding") brought by the U.S. Securities .._.""''"''-'-'"!"."'Commission (the "Commission"). The Proceeding relates to alleged violations of '-UAH.Uv>J as a pursuant to Rule 405 under the Securities Act of 1933 (the "Securities that the Division of Corporation Finance, on behalf of the Commission, determine that UBS AG shall not be

CONFIDENTIAL TREATMENT REQUESTED
BY UBS SECURITIES LLC
Mary Kosterlitz, Esq.
-2
BACKGROUND
The conduct of UBS Securities alleged in the Order Instituting Proceedings (the ''Order") involved the offer and sale ofthe COO to qualified institutional buyers in reliance on the exemption from registration under the Securities Act provided by Rule 144A thereunder, to accredited investors within the meaning of Rule 50l(a) under the Securities Act and to non-U.S. persons in reliance on the safe harbor from registration provided by Regulation S under the Securities Act. Specifically, the alleged conduct relates to UBS Securities' retention of certain upfront premiums in connection with credit default swaps on RMBS referenced as collateral in the COO. In connection with the Proceeding, UBS Securities and the Division of Enforcement have reached an agreement in principle to settle the Proceeding as described below, and UBS Securities has submitted to the Commission an offer of settlement in which, for the purpose of this Proceeding, it consents to the imposition of a cease-and-desist order (the "Order") without admitting or denying the matters set forth in the Order (except as to the jurisdiction ofthe Commission). In the Order, the Commission will order UBS Securities to cease and desist from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 206(2) ofthe Investment Advisers Act of 1940. The Order will also order UBS Securities to (i) disgorge $34,408,185, (ii) pay pre-judgment interest of$9,719,002.24, and (iii) pay a civil penalty in the amount of$5,655,000. DISCUSSION Under a number of Securities Act rules that became effective on December 1, 2005, a company that qualifies as a "well-known seasoned issuer" as defined in Rule 405 is eligible, among other things, to register securities for offer and sale under an "automatic shelf as so defined, to the benefits a

CONFIDENTIAL TREATMENT REQUESTED
BY UBS SECURITIES LLC
Mary Kosterlitz, Esq.
-3
Rule 405 under the Securities Act makes an issuer an "ineligible issuer" if, during the past three years, the issuer or any entity that at the time was a subsidiary of the issuer "was made the subject of any judicial or administrative decree or order arising out of a governmental action" that, among other things, "(A) prohibits certain conduct or activities regarding, including future violations of, the anti-fraud provisions of the federal securities laws" or "(B) requires that the person cease and desist from violating the anti-fraud provisions of the federal securities laws."2 Rule 405 also authorizes the Commission to determine, "upon a showing of good cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer."3 The Commission has delegated authority to the Division of Corporation Finance to grant waivers from any ofthe ineligibility provisions ofthis definition.4 The Order may be deemed to be an order arising out of government action ofthe kind that would result in UBS AG becoming an ineligible issuer for a period ofthree years after the Order is entered. This result would preclude UBS AG from qualifying as a well-known seasoned issuer and having the benefit of automatic shelf registration and other provisions of the new rules for three years. This would be a significant detriment for UBS AG. Being considered an ineligible issuer will preclude UBS AG from taking advantage ofmany ofthe benefits set forth in Rules 405 and 163 and will hinder necessary and periodic access to the capital markets through significantly increased time, labor and cost of such access. Consequently, automatic shelf registration and the other benefits available to a well-known seasoned issuer are significant forUBS AG. As described above, Rule 405 authorizes the Commission to determine that a company shall not be an ineligible issuer, notwithstanding that the company becomes subject to an otherwise disqualifying order arising out of government action. UBS AG believes that there is good cause, in this case, for the Commission to make such a determination with respect to the Order on the following grounds:
The disqualification ofUBS AG is not warranted given the nature ofthe alleged

nnnlllt'T described in the Order. The alleged conduct does not relate to UBS disclosures

it

* not a thereby preventing the and other offering participants from using \cTiting prospectuses during registered offerings of its securities. 17 7 § 1. note 21 1

CONFIDENTIAL TREATMENT REQUESTED
BY UBS SECURITIES LLC
Mary Kosterlitz, Esq.
-4
In light of the foregoing, we believe that disqualification ofUBS AG as an ineligible issuer is not necessary under the circumstances, either in the public interest or for the protection of investors, and that UBS AG has shown good cause for the requested relief to be granted. Accordingly, we respectfully request that the Division of Corporation Finance, on behalf of the Commission, pursuant to Rule 405, determine that it is not necessary under the circumstances that UBS AG be an "ineligible issuer" within the meaning of Rule 405 as a result ofthe Order. If you have any questions regarding this request, please contact me at (212) 558 3121. cc: John W. Madison, Esq. Rose Zukin, Esq. Joshua Pater, Esq. (U.S. Securities and Exchange Commission)