SEC Division of Trading and Markets no-action letter: UBS AG

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WA$HINGTON, D.C: 20549

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DIVISION OF . rING AND MARKETS
May 16,2008
. David B. Rockwell,. Esq.

Sullivan & Cromwell LLP.

1 New Fetter Lane

London, EC4A IAN

Utiited Kingdom

Re:. UBS. AG..

File. No•. TP. 08-52. .

Dear Mr.. Rockwell:.
. '. In. your. letter. dated May 16,2008, as supplemented by conversations with the staff

• ofthe. Division ofTrading and Markets. ("Staff'), you request on behalfofUBS AG, a
  corporation organized under the laws. ofSwitzerland ("UBS"), an exemption from, or confmnation that theSt&(fwill not recommend thatthe Securities. and Exchange Commission (the "Con:imission") take enforcement action under,. Rules 101 and 102 of Regulation M under the, Securitie.s Exchange Act of 1934 ("Exchange. Act") in connection
• with a rights offering announced by UBS (the "Rights Offering") and the. related global
  offering (the "Global Offering", together with the Rights Offering, the "Offerings").. Youseek exemptive or. no-aCtion relief to permit UBS. and certain uBS. Affiliates. .to. conduct specified.transactions outside. the United States, in UBS. Shares during the. Offerings. Specifically, you request that:. (i) UBS. ill be permitted to. continue. to. engage in marketinaking and principal client facilitation activities as described in your letter;. (ii) UBS. illbe.permitted to. continue to. engage in derivatives. market making and hedging' activities. as described in your letter;. (iii) UBS. ill be permitted to continue to. engage in unsolicited brokerage. activities as described in your letter; (iv) UBS Weaith Management be. permittedto continue to. engage in wealth management activities as described in your .' :!'-"'i , .letter; (v)UBS Global Asset Management be permitted to continue. to. engage in asset .. management activities as described in yo.ur letter; and (vi) UBS GT be. permitted to. continue. to engage in: employee share and option plan activities as. described in your letter.. You also. seek exemptive or no-action relief to permit certain UBS Affiliates to. conduct specified transactions. in the. United States in UBS Shares. during the Offerings. Specifically, you request that: (i) UBS Securities LLC be permitted to. continue. to engage in unsolicited brokerage activities. as described in your letter; (ii) UBS Wealth' Management U.S. be permitted to. continue to engage in wealth management activities as described in yout letter; and (iii) UBS Global Asset Manager:nent be. permitted to continue.
• to engage in asset mariagement activities as described in your letter. . I

David B. Rockwell, Esq.

May 16,2008

) - We. have. attached a copy ofyOQI correspondence to avoid reciting the. facts set forth therein. Unless. otherwise noted, each defined tenn in our response has. the same. meaning as. defined in your letter.. . -Response~' Based oli the. facts and representations that you have made. in your letter, but without necessarily concurring in youranaly~is,the. Commission hereby grants UBS an ex~niptionfrom Rules 101 and L02 to. pennit UBS ill, UBS Wealth Management, UBS. .Global Asset Management, UBS GT and UBS Securities LLC (collectively, the. "Companies") to continue. to engage in the transactions describedin your letter during the. Offerings. In particular, in your correspondence yoU make the following key' representations: .

• During 2007, the worldwide. average daily tradingvolume ("ADTV") DfUBS
  Shares Was approximately 17,328,414 shares, or CHF 1,167 million (or . approximately US$. 1,031 million at the. exchange rate on December 28,2007) in . value, and in March and Apri12008,the. worldwide ADrV ofUBS. Shares was. . approximately 27,699,890 shares, or CRP 836 million (or approximately US$ 804 million at the exchange rate on Apri130~ 2008)in value;. . . \ • UBS's aggregate marketcapitalizationas.ofDecember 28, 2007was. approximately r CRP i 08.7 billion (or approximatelyUS$ 96.2 billion at the exchange rate on . December 28,2007) and UBS's.free-'float adjusted market capitalization was. approximately CHF 101.i billion (or approximately US$ 895 billion at the exchange rate. on December 28,. 2007)~. As'of April 30,2008, UBS's aggregate market capitalization was approximately eHE 76.2 billion (or approximately US$
  73.3 billion at the. exchange rate onApril 30, 2008) and uBS's free-float adjusted
  market capitalization was approximatelycItF 703 billion (or approximately US$.
  67.7 billion at the exchange rate. on April 30,2008);
• .TheUBS Shares comprised 10.2% ofthe Swiss Market Index,. 8.5% ofthe. Swiss.. '
  Perfonnance Index, and 8.7% ofthe Swiss Leader Index as ofDecember 28, 2007; .
• SWX Europe. is the principal trading market for UBS Shares 'and tra<!ing on the
  SWXEurope accounted for approximately 92.9% of the worldwide ADTV in UBS Shares during 2007.. In Marchand Apri12008, SWXEurope accounted for approximately 87.8% ofthe worldwide ADTV in UBS Shares;.
• .UBS shareholders will be. allotted the Rights to purchase up to 1.25, billion New
  Shares and the number ofNew Shares to be. issued in tl}.e Rights offering is expectedto translate. into net proceeds of approximately CRF 15 billion to. UBS; . ) /

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David B. Rockwell,. Esq.
May 16,.2008

• UBS maintains and enforces written "Chinese Wall" policies and procedures to
  prevent price-:-sensitive information from passing between ~y area in which Market Activities are conducted and any other area ofUBS. in which price-sensitive information relating to UBS. Shares would be available~ .• UBS ill conducts its. market making and principal client facilitation activities, derivatives market making and hedging a.ctivities, and unsolicited brokerage activities. outside the United States;
• UBS Wealth Management and UBS. Global Asset Management conduct their
  wealth management and asset management activities both outside and inside. (as discussed below) the United States; . . .UBS GT conducts. its employee share. and option plan activities outside the. United States;
• Aii ofthe Market Activities together (cotmting all sides. of each trade in which it
  participates) conducted by the. Companies. as described in your letter accounted for approximately 10.5%ofthe worldwide ADTV ofUBS Shares. iIi 2007;
• Thewithdrawal of a significant market tpaker in UBS. Shares (and in derivatives. on
  UBS Shares) in the primary market for those shareS;'which are. among the. most actively traded ~:)li SWX Europe, for an extended period. oftime would have. serious. hannful effects in thehome. market and, indirectly, in the. United States market,. for the UBS. Shares, inCluding a significantimbalance ofbuy and sell orders,. which could cause. greatervolatility all.d reduced liquiditY; . .
• UBS ill, UBS Wealth Management,UBS Global Asset Management, and UBS GT
  have each confirmed that the activities. for which it is requesting reliefwill be conducted in the ordinary course ofits. businesses. and in accordance with applicable Swiss law, the. Laws ofthe United Kingdom and otheilocallaws;
• In the United States, UBS conducts a securities business through a separate
  subsidiary, UBSBecurities LLC,which is registeredwith the Commission as. a broker-dealer and is a member ofthe. Financial Indu~try Regulatory Authority and the NYSE. UBS Securities LLC will only engage iIi unsolicited brokerage activities in the normal course ofits business. with its customers;
• In the United States, UBS Wealth Management U.S. conducts its wealth
  management business through UBS Financial Services~ Inc., UBS International Inc. and UBS Financial Services. Incorporated ofPuerto Rico, each of which is registered with the Commission as a broker-dealer andirivestmeni adViser, as well as through an aCC-regulated branch ofUBS AG and through UBS Bank USA, a

.David B. Rockwell, Esq.

May. 16,2008

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,) Utah ILC.. Each ofthese. entities will only engage inwealth management activities . in the nonnal course ofits. business with its. customers; and

• In the United'States, UBS Global Asset Management conducts a business group
• ·throughthree'separate'sub"groups:Altemative-&Quantitative;~-Real··Estate-and··
  Equities, F)xed Income. & Global Investment Solutions,.which are registered investment advisers.. Each ofthese entities will only engage in asset management activities in the nonnal course. ofits. businesses. with its. customers' The.exemption is subject to. the'following conditions:

1. None ofthe. transactions ofthe.Companies described in your letter shall occur in
   the. United States? with the exception ofthe. unsolicited brokerage, wealth management, and asset management activities of certain UBS Affiliates as. described in your letter;
2. All ofthe transactions described in your letter f{)r which you seek reliefshall be,
   effected in the. ordinary course ofbusiness and not for the purpose offacilitating the. Offerings; .3. The. offe~ng documents. that will be distributedto United States. investors. that

) participate in theOfferings~discloses the possIbility of, or the intention to. make,

-' the transactions described in you letter; .

4. UBSandeach ofthe Companies will provide tathe Division ofTrading and
   Markets. ("Division"), ripon request, a time-sequenced schedule of all such transactions made during the Offerings..Such schedule. will include:
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   (a) size, broker (ifany), time of execution, andprice ofthe transactions; (b) the exchange, quotation system, or other facility through which the transactions occurred,. and. (c) whether the transactions. were. made for·a customer account or a proprietary . account;
5. Upon request ofthe Division,. UBS and each ofthe Companies will transmit the
   infonnation requested In item 4 (above) to the Division at its offices in Washington . DC within 30 days ofits request; 6.'UBS and each of the Companies shall retain all documents. and other infonnation . required to be maintained pursuant to this letter for at least two years following the completion ofthe Offerings; )

.. David B..Rockwell,. Esq.

May 16,2008

Page. 5. of5.

) 7.. Representatives. ofUBS. and each ofthe. Companies shall be. made available (in person at the offices of,the Commission in Washington, DC or by telephone) to . respond to. inquiries ofthe. Division relatingto their records~ and .. ---- .. -- -8-::--Exceptas-otherwise:-directed-by-this·tetter;-l:::JBS and each ofthe:CompanieswiU-- .-- -.. . .. comply with RegulationM. The. foregoing exemption from Rules 101 and 102 ofRegulation M is. based solely on your representations. and the facts presented to. the Staff and is. strictly limited to the appiication ofthis. rule. to. theproposedtransactions.. Such transactions should be· discontinued, pending presentation ofthe. facts.for our consideration~in the event that any material change occurswith respect to. any ofthose'facts. or representations.. In addition, your attentionis. directed to. the anti-fraud and anti-manipulation provisions. ofthe. Exchange Act, including Sections 9(a) and lO(b), and Rule lOb.;.5 thereunder... Responsibility for compliance with these and any other applicable. provisions ofthe federal securities. laws fillst rest with the. participants in the. variousAransactions.. The Division expreSses no view with respect to. any other questions that the. proposed transactions. may raise, including,butnot limited to, the adequacy ofdisclosure . concerning, and the. applicability of any other federal or state. laws. to,the proposed transactions. \ / For the. Coriunission, . . by the Division ofTrading and Markets, pursuant to. delegated authority, .?7~ Josephine J.. Tao. Assistant Director Attachment , ,//

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SULLIVAN 8. CROMWELL lflfPCE\lED
A UMITED UAsIUTY PARTNERSHIP
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TELEPHONE: +44(0)20-7959-8900
FACSIMILE: +44 (0)20-7959-8950
LOS ANGELES • NEW YORK • PAl.OAL.TO. WASHINGTON, D.C.
BEIJING. HONG KONG. TOKYO
MELBOURNE. SYDNEY
May 16,2008

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  LnUB K,~f 2.1 M" \0: 39
  FRANKFURT. PARIS
  Division ofTrading and Markets,
  Securities and Exchange Commission,
  100 F Street,NE,
  Washington, D.C. 20549.
  Attention: James A. Brigagliano, Associate Director, Division ofTrading and Markets Re: UBS AG: Request for Exemptive andlorNo-Action Relief from Rules 101 and 102 ofRe@lationM Ladies and Gentlemen:
  We are writing as counsel to UBS AG ("UBS"), a corporation (Aktiengesellschaft) organized under the laws of Switzerland, about the application of Regulation M to transactions by UBS and its affiliates (the "UBS Affiliates", and each a "UBSJ\ffil~ate"), in the ordinary shares ofUBS ("UBSShares") in coimection with a rights offering announced by VBS (the "Rights Offering"), in which UBS' s existing shareholders will receive tradable rights (the "R~ghts")' to subscribe for new UBS Shares (the ''New Shares") and the related global offering (the "GI<;>bal Qffering", together with the Rights Offering, the "Offerings"), in which New Shares that have not been taken up by holders ofRights and that have not otherwise been sold in open market tranSactions will be offered as further described below. Specifically, on behalfofUBS, we ask the Staffto grant exemptive relief from, or to confirm that the Staff will not recommend that the Securities and Exchange Commission (the "SEC") take enforcement action under, Rules 101 and 102 of Regulation M in connection with the continuation by UBS and the VBS Affiliates, in the ordinary course oftheir respective businesses as described below and in accordance with applicable local law, of the following activities during the Offerings:
• Market Making and Principal Client Facilitation in UBS Shares: UBS
  Investment Bank ("UBS IB") regularly makes bids and offers for UBS Sullivan & Cromwell LLP is a registered limited fiabirrty partnen;hip established under the laws of the State of New York.

The pen;onalliabilily of our partners is limited to the extent provided in such laws. Additional information is available upon request or at www.sullcrom.com.

A list of the partners' names and professional qualifications is available for inspection at the above address.

All partnen; are .either registered foreign lawyers in England and Wales or solicitors. Regulated by the Soliciton; Regulation Authority.

Division ofTrading and Markets -2..
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Shares on SWX Europe Limited ("SWX Europe,,)1 and on Chi-X Europe .Limited ("Qll:X") and regularly purchases and sells VBS Shares on SWX Europe and on Chi-X and in the over-the-counter market in Switzerland ---(-and,in somecases,-elsewhereoutsidethe United- States)~ l;JBS-IJJeffects· these transactions for its own account in order to provide liquidity to the trading market for UBS Shares and to facilitate customer transactions.

• Derivatives Market Making and Hedging: As a derivatives market
  maker, UBS IB issues, buys and sells derivatives on UBS Shares for its own account and for the account of its customers on the EUREX exchanges ("EUREX"), on Scoach2 and in the over-the-counter market in Switzerland, the United Kingdom and elsewhere outside the United States. These derivatives may include both currently existing and newly designed listed and over.;.the-counter options, warrants, convertible securities and other structured products (including exchange.;.traded funds and other portfolio-type instruments) relating to UBS Shares or to baskets or indices including uas Shares, as well as futures on the foregoing. UBS IB engages inderivatives market-making activities in order to provide liquidity to the derivatives market and to facilitate customers' derivatives transactions. 3 In addition, UBS IE solicits and effects trades in UBS Shares for its own account and for the accounts ofits customers for the purpose ofhedging positions (or adjusting or liquidating existing hedge positions) ofUBS and its customers thatare established in connection with UBS IB's derivatives market-making activities. These hedging transactions are effected on SWX Europe, on Chi-X and in the over-the￾counter market in Switzerland (and, in some cases, elsewhere outside the United States). Prior to March 3,2008, SWX Europe operated under the name virt-x Exchange Limited. 2 Scoach is a joint venture for structured products founded by the Swiss Financial Market Services AG and Deutsche Borse AG on October 23, 2006. The jointly owned exchange operates trading facilities in Frankfurt through Scoach Europa Ltd. (for Germany' and other countries ofthe European Union) and Zurich through Scoach Switzerland Ltd. (for Switzerland). 'Scoach Europa Ltd. and Scoach Switzerland Ltd. are supervised by the national stock-exchange supervisory bodies oftheir respective jurisdictions. 3 These market activities also include UBS IE's market-making in derivatives conducted on a contractual basis with investors. ) .. / LONDON:306201.2A

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• Unsolicited Brokerage in UBS Shares: UBS IB effects unsolicited
  brokerage transactions in UBS Shares by placing orders on SWX Europe Qr on Chi-X or effecting trades in the over-the-counter market in -Swlfzetlatid;tli(nJruled Kingdom; and -erseWIYeie-outSi(fetlieUnilea'- States. These transactions arise from unsolicited buy or sell orders received by UBS IB from its customers. In addition, UBS Securities LLC, UBS 18's affiliated U.S. broker-dealer, may also engage in unsolicited brokerage activities of the kind described above with its customers in the United States. We ask that the requested relief also cover such activities.
• Trading in UBS Shares and Derivatives by UBS Wealth Management:
  UBS's wealth management business units, Wealth Management International & Switzerland and Wealth Management U.S. (collectively, "UBS Wealth Management"), which are included in the business group Global Wealth 'Mcritageme'nt & Business Banking ("GWM&BB"), provide, among other.products and services, wor1dwid~ inVestment services to high net worth and other affluent individuals.4 As part ofits ordinary advisory investment management activities on behalf ofits clients, UBS Wealth Management buys and sells UBS Shares and derivatives on uas Shares for its clients' accounts. The market activities . \ i of UBS Wealth Management are conducted both outside and inside (through direct and indirect subsidiaries) the United States and primarily' in Switzerlandand the U.K. through the facilities ofSWX Europe and in the United States through the facilities ofthe NYSE.
• Trading in UBS Shares and Derivatives by UBS Global Asset
  Management: UBS's asset management division, vas Global Asset Management, provides traditional, alternative and real estate investment solutions to private clients, financial intermediaries.and institutional' investors worldwide. As part of its ordinary investm~nt management activities on behalfofits clients, UBS Global Asset Management buys and sells UBS Shares and derivatives on UBS Shares for its clients' accounts. The market aCtivities of UBS GlobalAsset Management are conducted both outside and inside of the United States and primarily in Switzerland and the U.K. through the facilities ofSWX Europe and in the United States through the facilities of the NYSE.
• Trading in UBS Shares Pursuant to Employee Incentive Plans. UBS's
  group treasury department ("UBS GT") regularly purchases UBS Shares on the open market to facilitate the grant of awards or the exercise of Wealth ManagementU.S. also provides advisory investment services to retail customers in the United States. ) LONDON:306201.2A 4

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) options pursuant to the terms ofUBS's employee share and option plans, and buy-'back uas Shares that are forfeited or sold in accordance with those plans. These activities are conducted outside the United States and --in-accordance with-UBS'sfiduciary-duties-arising-from-those plans.------- In addition to the market activities described above, UBS Affiliates intend to engage in various market activities relating to the Rights. The availability of the exemptive and/or no-action reliefUBS is requesting would be conditioned on the disclosure and record-keeping undertakings outlined below. The following representations about the market for UBS Shares and UBS's market activities have been provided to us by uas.
I. The Market for the uas Shares ; ( j ,,)
The uas Shares are listed on the SWX Swiss Exchange (the "SWX") (trading onSWX Europe, a wholly-owned affiliate of8WX), the New York Stock Exchange (the "NYSE") and the Tokyo Stock Exchange. During 2007, the worldwide average daily trading volume ofUBS Shares was approxirriately 17,328,414 shares, or .. CHF 1,167 million (or approximatelyUS$ 1,033 million at the exchange rate on December 28,2007) in value.s As ofDecember 28,2007, UBS's aggregate market capitalization was approximately CHF 108.7 billion (or approximately US$ 96.2 billion at the exchange rate on December 28,2007) and uas's free:-float adjusted market capitalization was approximately CHF 101.1 billion (or approximately US$ 89.5 billion at the exchange rate on December 28,2007). As ofDecember 28,2007, VBS was the fourth largest listed Swiss company in terms ofmarket -capitalization.6 . SWX Europe is the principal trading market for uas Shares. During 2007, SWX Europe accounted for approximately 92.9% ofthe worldwide average daily trading volume in l)as Shares. During 2007, the average daily trading volume of uas Shares on SWX Europe was approximately 16,094,377 shares, or CHF 1,086 5 In March and April 2008, the worldwide average daily trading volume of uas Shares was approximately 27,699,890 shares, or CHF 836 million (or approximately VS$ 804 million at the exchange rate on April 30, 2008) in value. 6 As ofApril 30, 2008, uas's aggregate market capitalization was approximately CHF 76.2 billion (or approximately US$ 73.3 billion at the exchange rate on April 30,2008) and its free-float adjusted market capitalization was approximately CHF 70.3 billion (or approximately US$ 67.7 billion at the exchange rate on April 30, 2008). As of April 30, 2008, vas was the fifth largest listed Swiss company in terms of market capitalization. )

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Division ofTrading and Markets -5
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\ million{or approximately US$ 961 million at the exchange rate on December 28,2007) in value.7

• ------------- --_.. -- ... SWX-~Eu:rop.e-w-as-fQunded in2001.--lt-is~-reGogni-zed investment-- --- .
  exchange under the U.K. Finap.cial Services and Markets Act 2000 (the "FS¥A") supervised by the U.K. Financial Services Authority (the "FSA"). SWX Europe operates, among others, a European Union ("EU")-regulated market segment and a U.I<. exchange￾regulated market segment for Swiss blue chip equities and related securities. The . procedure for listing Swiss blue chip equities is under the authority ofthe SWX, while admission to trading and trading on SWX Europe are under.the authority ofthe FSA. Swiss blue chip equities listed by SWX are admitted to trading on SWX Europe. SWX Europe provides for an electronic trading order book. It is an order￾driven market with transactions occurring through the automatic matching ofbuy and sell , orders. In general, orders are executed giving priority to price and then to time of entry:
  In 2007, the aggregate turnover on SWX Europe was in excess of CHF 2 trillion, ofwhich CHF 1.9 trillionrelated to Swiss equity securities. As of December 28,2007, the overall market capitalization of equity securities traded on SWX Europe wasapproximatelyCHF 1J trillion. As ofDecember 28, 2007, there were 1,045 securities admitted to trading on SWX Europe (excluding exchange-traded funds), of ) .which40 were Swiss securities and the remainder pan-European securities. . . . There are a number of key market indices under the authority ofthe SWx. These market indices include, among others, (i) the Swiss Market Index (the "S.MI"), which is comprised of20 equity securities of the most prominent companies listed on the SWX and, as ofDecember 28,2007; represented approximately 82.6% ofthe free-float totalmarket capitalization ofthe SWX, (ii) the Swiss Performance Index (the "~PI"), which mainly consists of SWX-traded equity securities of companies domiciled in Switzerland or the Principality ofLiechtenstein, and (iii) the SLI Swiss Leader Index (the "§JJ"), which includes the 30 most liquid domestic stocks traded on the Swiss equity market, including the equity securities included in the SMI. SWX Europe serves as a trading platform for the shares included in the SMI and the SLI. ; The UBS Shares are a significant component of SWX Europe and the SWx. The UBS Shares comprised 10.2% of the SMI, 8.5% of the SPI and 8.7% of the SLI as ofDecember 28,2007. 7 In March and April 2008, SWX Europe accounted for approximately 87.8% ofthe worldwide average daily trading volume in UBS Sharesand the average daily trading volume ofUBS Shares on SWX Europe was approximately 24,326,400 shares, or CHF 736 million (or approximately US$ 708 million at the exchange rate on April 30, 2008) in value. ) ,/ WNDON:30620 1.2A

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Division ofTrading and Markets -6
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The l)BS Shares are also traded on ~hi-X. Founded in 2006, Chi-X is an FSA-authorized securities finn operating as a multilateral trading facility for the trading of a wide range ofEUfopean equities. Chi,.X is an indirect subsidiary ofNomura . ... ... .---}'lotdttrgs;-Inc~8-Tral1ing on Chr,:X<fccounted-fnr-less th-an-O-.t%-oftn-e-worldwideavetage daily trading volume in UBS Shares during 2007. In May 2000, VBS listed the UBS Shares on the New York Stock Exchange ("NYSE"). The VBS Shares are listed on the NYSE in the fonn ofshares; VBS is not aware that there are any UBS Shares trading in the form ofAmerican Depositary Shares (ADSs) in the United States. During 2007, the average daily trading volume ofUBSShares on the NYSE was approximately 1,212,933 shares, or CHF 80 million (or approximately US$ 70 million at the exchange rate on December 28, 2007) in value. During 2007 the United States accounted for approximately 6.9% ofworldwide average daily trading volume in the uas Shares.9 . The UBS Shares are also traded on the Tokyo Stock Exchange, which accounted for less than 0.1 % of the worldwide average daily trading volume during 2007.
II. Market Activities
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UBS is a global, integrated financial services firm with -businesses in private banking, asset management, investment banking and retail and commercial banking. VBS has offices worldwide and itsprincipal executive offices are located in Zurich and Basel, Switzerland. UBS is a foreign private issuer as defined in Rule 3b-4(c) under the Securities Exchange Act of 1934. uas IB is part of UBS, but operates as a separate division. ljBS IB conducts a full-service securities business. Although UBS IB has offices throughout the world outside the United States, its principal executiyeoffices are located in Zurich, and the market activities for which UBS is seeking reliefwill be managed principally by representatives in Zurich and London. UBS IB is regulated by and licensed under the Swiss Federal Act on Banks and Savings Institutions and the Swiss Federal Act on Stock Exchanges and Securities Trading (the "SESTA") in Switzerland and the Financial Services Actin the United Kingdom, among other laws and regulations. 8 A consortium of 13 firms, including uas, has taken a minority stake in Chi-X at the beginning of2008. . 9 In March and Apri12008, the average daily tradin.g volume ofUaS Shares on the. NYSE was approximately 3,231,lt-98 shares, or CHF 96 million (or approximately US$ 92 million at the exchange rate on April 30, 2008) in value. In March and April 2008, the NYSE accounted for approximately 11.7% ofworldwide average daily trading volume in the VBS Shares. LONDON:30620 1.2A

Division·ofTrading and Markets -7
. In the United States, UBS conducts a securities business through a separate subsidiary, UBS Securities LLC, which has its principal. offices in Stamford, Connecticut and New York City. UBS Securities LLCis registered with the SEC as a -------- ----- _.- -brokeFdealerarrd-isa memberoftheFinanciat-frrdustry-RegulatoryAutltority-and-the- --- NYSE. uas Securities LLC will not engage in the UBS IB activities for which UBS is seeking relief (other than unsolicited brokerage); rather these activities (including unsolicited brokerage) will be conducted by UBS IB outside the United States as described below. UBS Wealth Management is part of GWM&BB, which operates as a separate business group and is comprised ofthe Swiss, international and U.S. wealth management businesses, along with UBS's Swiss corporate and retail banking unit. Wealth Management International & Switzerland's principal offices are located in Zurich. In the United States, Wealth Management D.S. conducts its wealth management business principally through UBS Financial Services, Inc., an SEC-registered broker .dealer and investment adviser, which is a wholly-owned indirect subsidiaryofUBS. UBSFinancial Services is headquartered in Weehawken, New Jersey, and has more than 400 offices across the United States. For the sake of completeness, Wealth . Management U.S. also conducts its wealth management business through smaller entities, namely UBS International Inc. and VBS Financial Services Incorporated of Puerto Rico, ) each of which is registered with the SEC as a broker-dealer and investment adviser, as well as through an aCC-regulated branch ofl,JBS and through VBS Bank USA, a Utah industrial loan corporation. . . UBS Global Asset Management operates as a separate business group. Outside the United States, its prinCipal offices are in Zurich, Basel, London and Hong Kong. In the United States, it is comprised ofthree separate business sub-grOUps:
Alternative &, Quantitative, Real Estate and Equities, Fixed Income & Global Investments Solutions. All three sub-groups operate out ofseparate, wholly-owned subsidiaries ofUBS, which are U.S. registered investment advisers. The principal offices for the Alternative & Quantitative and Equities, Fixed Income & Global Investments Solutions sub-groups are in Chicago, Illinois, while the Real'Estate sub-group hM its principal offices in Hartford, Connecticut. VBS GT is part ofl,JBS Corporate Center, a department ofUaS, with pnncipal executive offices in Zurich. UBS GT is principally responsible for the management of UBS' financial resources and financial infrastructure. Among other responsibilities, UBS GT manages UBS group's equity, including UBS's treasury shares, taking into account financial ratios and regulatory capital requirements. UBShas confirmed that the activities described below, for which it is requesting relief (the "Market Activities"), are permitted under and would be conducted in accordance with applicable Swiss, U.K. and other local laws. In addition, UBS has ) LQNDON:306201.2A

Division ofTrading and Markets -8 confirmed that all ofthe Market Activities described belo~ together (counting all sides of each trade in which it participates) accounted for approximately 105% of the average . worldwide trading volume in UBS Shares in 2007. . UBS has established "Chinese Wall" procedures to prevent price-sensitive information from passing between any area in which the Market Activities are conducted and any other area of VBS iIi which price sensitive information relating to UBS Shares would be available. Accordingly, during restricted periods prior to announcements of earnings results or other material developments that have not yet become public, all market-making and other ordinary course market activities are permitted to continue. UBS will continueto maintain these Chinese Wall procedures during the Offerings. Market Making and Principal Client Facilitation in VES Shares. UBS IB conducts its market-making ~ctivities o~tside the United St~tes and manages these activities from Zurich and London. UBS IB purchases and sells uas Shares as principal to facilitate customer transactions and provide liquidity to the market. Most of these market-making transactions are effected on SWX Europe, with the balance effected on Chi-X and in the Swiss over-the-counter market and, in some cases, the over-the-counter markets elsewhere outside the United States. As noted above, SWX Europe is an order￾matching system, not an inter~dealer market with formal, officially designated market makers. Thus, with regard to VBS Shares, neither VBS IB nor any other dealer is obligated to make a market or to comply with any particular market-maker requirements, and they are free to discontinue market making at any time. During 2007, VBS IB was one ofthe largest market makers in the VBSShares, accounting for approximately 8.3% of SWX Europe average daily trading volume in the UBS Shares. UBS IB engages in the MarketActivities described above solely in the ordinary course ofbusiness and not in contemplation ofthe Offerings, although the Offerings may result in greater selling pressure and thus higher volumes oftransactions by UBS IB. . Derivatives Market Making and Hedging. VBS IB conducts its derivatives market-making activitles outside th6U';it~d States and manages these activities principally from Zurich and London.. In Switzerland, VBS IB is admitted under EUREX rules as a market maker, and is one of the most significant market makers in derivatives on UBS Shares, accounting for approximately 5.7%ofthe average daily market-making volume in such derivatives in 2007. This activity involves the issuance, purchase and sale of derivative products for its own account and for the accounts ofits customers on EUREX, on Scoach and in the over~the-counterml:!-rket in Switzerland, the United Kingdom and elsewhere outside the United States. 10 These derivative products inay include both currently existing and newly designed listed and ,over-the-counter 10 This may
include NYSE Euronext, OMX; IDEM (the Italian Derivatives Exchange Market) or Bolsa de Madrid. )

. LONDON:306201.2A

Division ofTrading and Markets -9
) options, warrants and other securities (including exchange-traded funds and portfolio￾type instruments) that are exercisable for or convertible into, or the value ofwhich is determined by reference to, UBS Shares or proprietary or third-party baskets or indices -----------... --mclUomI~·UBg-Snares~--Tliese-deiiva.llves -may iilso'iilClllife-fufUfeson the-f6regoing~-I-I'-- UBS IB's derivatives market making involves issuing, purchasing and selling derivatives on UBS Shares in order to facilitate customer orders and proyide liquidity to the market. 12 . In addition, as a result of its derivatives market making, UBS IB will maintain varying positions in these derivatives, and its financial exposure to movements in the price of the UBS Shares will vary from time to time. In order to manage this .financial exposure, UBS IB continually enters into hedging transactions that involve, in whole or in part, purchases and sales ofUBS Shares for UBS IB's own account. UBS IB also effects brokerage transactions in UBS Shares, on an unsolicited basis, on behalf of its customers in order to assist them in hedging their derivatives positions. UBS IB engages in the Market Activities described above solely-in the ordinary course ofits business and not in contemplation ofthe Offerings. These Market Activities occur primarily on SWX Europe, with the balance occurring on Chi-X and in the over-the-counter market in Switzerland and, in some cases, the over-the-counter markets "elsewhere outside the United States. Unsolicited Brokerage. UBS IB effects unsolicited brokerage transactions , in UES Shares by placing orders on SWX Europe or Chi-X or effecting trades as agent in theover-the'-counter market in Switzerland, the United Kingdom and elsewhere outside the United States. These transactions arise from unsolicited buy and sell orders received from its customers. As-noted above, UBS Securities LLCmay also engage in unsolicited brokerage transactions with its customers in the United States. UBS iB and UBS Securities LLC engage in the Market Activities described above solely in the ordinary .course of their respective businesses and not in contemplation of the Offerings. II UBS's derivative market activities include the use of Equity Investor. Equity Investor is a web-based tool which enables UBS's client advisors to create tailor￾made structured products online. Trading, hedging, securitization l;i.nd settlement on Equity Investor are executed on a fully automated basis. UBS's client advisors use this platform principally in Switzerland and Germany. Since 2003, more than 35,000 individual structured products have been issued based on this platform. 12 These market activities also include UBS IB's market-making in derivatives conducted on a contractual basis with investors. ) LONDON:30620 1.2A

Division ofTrading and Markets -10
-Trading in UBS Shares by U;SS Wealth Management. As part ofits wealth management activities, UBS Wealth Management buys and sells securities, including UES Shares and derivatives on UBS Shares, for its clients' accounts pursuant ---- --- -- ~----- --todiscretion-aryornun-;;discretiorrary-mandates~J3-UnderlIIYPticable-laws;-indudirrg-Swtsg------ laws and the laws ofNew York, among others, and subject to the terms of any contractijal arrangements as in effect from time to time between UBS Wealth Management and its clients, UBS Wealth Management has a fiduciary duty to conduct its investment advisory management activities in a manner that is in the best interests ofits clients and is prohibited by contract and by law from taking into account any factors other than the interest ofits clients in making investment decisions. In addition, UBS Wealth Management has fiduciary or similar duties to make recommendations as to non,;. discretionary advisory accounts in a manner that is in the best interests ofits clients. UBS Wealth Management also has a contractual duty to follow the investment instructions of clients holding non-discretionary advisory and brokerage accounts. Accordingly, UBS Wealth Management would be prohibitedby contract and by law from following a directive by UBS to cease trading UBS Shares or derivatives on UBS Shares during the Restricted Period (as defined below),un~ess UBS Wealth Management believed that cessation of such trading was in the best interests ofits clients. Similarly, UBS Wealth Management would be prohibited by contract and by law from following aUBS directive to bid for orpurchase UES Shares or derivatives orIUBS ) Shares unless it independently concluded that such bids or purchaSes werdn the best interests ofits clients. For the 12 months ended December 31,2007, these activities ofUBS Wealth Management accounted for approximately 1.8% ofthe worldwide average daily trading volume ofUBS Shares, all ofwhich was executed through UBS IB and is included in the VBS IBfigures given above. UBS Wealth Management engages in these Market Activities solely in the ordinary course ofbusiness and not in contemplation of the Offerings. These Market Activities are conducted both outside and inside theUnited States and primarily in Switzerland and the V.K through the facilities ofSWX Europe

• and in the United States through the facilities ofthe NYSE.
  Trading in VBS Shares by UBS Global Asset Management. As part ofits investment management activities, VBS Global Asset Management buys and sells securities, including VBS Shares and derivatives on UBS Shares, for its clients' accounts pursuant to various mandates, including actively managed core portfolios, growth, quantitative or passive strategies. Under applicable laws, including Swiss laws and the laws ofNew York, among others, and subject to the terms of any contractual arrangements as in effect from time to time between VBS Global Asset Management and 13 Derivatives investment activities also includes the use ofthe Equity Investor platform (see Note 11 above). \ / LoNDON:306201.2A

Division ofTrading and Markets ":11
) the relevant client accounts, uas Global AssetManagement has a fiduciary duty to oversee client accounts in a manner that is in the best interests of its clients. UBS Global .Asset Management is prohibited by contract and by law from taking into account any

• --'--~-' .. ----------··-faet0r-s-other-than·theinterest-ofthe-beneficiaries--ofdient-accounts-in-making-investment --------..--.
  decisions.
  Accordingly, uas Global Asset Management would be prohibited by contract and by law.from following a directive byDBS to cease trading uas Shares and derivatives on UBS Shares during the Restricted Period, unless UBSGlobal Asset Management believed that cessation ofsuch trading was in the best interests ofthe beneficiaries of client accounts. Similarly, UBS Global Asset Management would be prohibited by contract and by law from following a uas directive to bid for or purchase uas Shares orderivatives on uas Shares unless itindependently concluded that such bids or purchases were in the best interests of the beneficiaries of client accounts. For the 12 months ended December 31, 2007, these activities ofvas Global Asset Management accounted for less than 0.3% of the worldwide average daily trading volume ofUaS Shares, pfwhich a substantial portion was executed through VBS IB and is included in the figures given for UBS IB above. UBSGlobalAsset Management engages in these Market Activitiessolely in the ordinary course ofbusiness and not in contemplation ofthe Offerings. These Market Activities are conducted both outside and inside the United States and primarily in Switzerland and the U.K. through . the facilities ofSWX Europe and in the United States through the facilities of the NYSE. Trading iIi UBS Shares Pursuant to Employee Incentive Plans. uas GT regularly purchases UBS Shares on the open market to facilitate the grant of awards or the exercise of options pursuant to the terms ofUBS's employee share and optionplans, .and buy-back UBS Shares that are forfeited or sold in accordance with those plans. These activities are conducted outside the United States and in accordance with UBS's fiduciary duties arising from those plans. These activities of UBS GT historically have represented a small proportion of all trading in UBS Shares, and for the 12 months ended December 31, 2007, the average daily trading volume ofUaS Shares traded pursuant to these activities represented approximately 1.2% ofthe worldwide average daily trading volume ofvas Shares. VBS GT engages in the Market Activities described above solely in the ordinary course ofits business and not in contemplation ofthe Offerings. In addition to the Market Activities, UBS Affiliates intend to engage in various market activities relating to the Rights. \ . " .- i \ / LQNDON:30620I.2A

----·----·-·----in-which-UB-S--sharehOlders-wi-H-be aH-oUeeHhe-Rights-to-purchase-up-to -l-.-2-5-biHion New -.-- Division ofTrading and Markets -12
III. The Offerings
On April 1
S t, 2008, uas announced the Rights Offering, a capital increase . Shares. The New Shares have been subscribed by, and will be offered through, an underwriting syndiCate. The Rights Offering will consistof public offerings in Switzerland, Gennany, certain other member states ofthe European Economic Area ("!WA"), the United States and of private placements in certain other jurisdictions. The final issue price (the "Issue Price") and number ofNew Shares to be issued in the Rights Offering will be detennin~dshortly before launch (as described below) and are expected to translate into net proceeds of approximately CHF 15 billion to uas. uas's shareholders approved this capital increase at the annual general meeting ofthe shareholders held on April 23, 2008. The record date for the allotment of the Rights is expected to be on Monday, May 26,2008 (the "Record Date"). The final Issue Price (and any consequent adjustment to the exercise ratio, the "Exercise}\atio") will be detemiined before the Record Date as provided for under the underwriting agreement. Holders of UBS Shares at the Record Date will then be allotted Rights pro rata, i.~., one Right for each existing UBS Share owned. The Rights are expected to be traded on the EU-regulated market segment of SWX Europe and on the NYSE from May 27 to June 9, 2008. 14 Holders ofRights will be able to exercise their Rights to purchase New Shares pursuant to the final Exercise Ratio and at the final Issue Price from May 27 to June 12, 2008 (the "Exer<?ise Period"). 15 To the extent Rights are not exercised on or before the end ofthe Exercise Period, they will be forfeited without any compensation. New Shares which have not. been taken up during the Exercise Periodwill then be sold in open market transactions or offered in the Global Offering. The Global Offering, if any, will consist of(i) a public offering in Switzerland, Germany and other EEA member states, (ii) private placements to certain institutional investors outside the United States in reliance on Regulation S under the Securities Act of 1933 (the "Securities Act") and relevant local securities laws and (iii) a public offering in the United States under the Securities Act. The Global Offering price is expected to be detennined following an institutional bookbuilding procedure commencing on or about 14 The Rights trading period will be established as the period from May 27 to June 9, 2008 for all markets, but the NYSE will suspend trading in the Rights on the NYSE on the last day ofthe period in accordance with its customary practice. 15 UBS Shares held in treasury by UBS or its affiliates will be allotted Rights in the Rights Offering and UBS intends to exercise or sell those Rights. LONDON:306201.2A ) \ /

, .
Division ofTrading and Markets -13
June 12,2008 and is expected to be published in the electronicmedia on or about June 13, 2008 and in several newspapers the next day. -- .~. -'.~ .,-~---~..~-~-.~~~ .--~~.-.. ·-f()r-t-he-purpC:lse-oHhe-U-;-&-portions-C:lHhe-0fferings;-UB-S-has-filed with--~'~------ --~~ -~. the SEC a Registration Statement on Form F-3 (File No. 333-150143) to register the Rights and the New Shares under the Securities Act. Pursuant to the'rules ofthe SEC, the Registration Statement is an automatic shelf registration statement within the meaning of Rule 405 under the Securities Act and became effective upon filing with the SEC. The New Shares will be submitted for listing on the EU-compatible segment ofthe SWX, the NYSE and the Tokyo Stock Exchange. Trading ofthe New Shares is expected to commence on or about June 13, 2008. Settlement of the Offerings is expected to take place on or about June 17, 2008. 16
IV. Application of Regglation M
In connection with the Offerings, UBS, directly or through underwriters, will offer and sell UBS Shares to U.S. investors and will, therefore, be engaged in a distribution in the United States for purposes of Regulation M. We have assumed that, under Regulation M , the restricted period for the Offerings (the "Restricted P~ri9d") would begin one business day prior to the determination of the final Issue Price and will \ .I end upon completion of the Offerings in the United States. Thus, the Restricted Period is likely to last approximately four weeks. As affiliates or separately identifiable departments ofUBS that regularly purchase securities for their own accounts and the accounts of others or recommend and exercise investment discretion with respect to the purchase ofsecurities, UBS IB, UBS Securities LL~, UBS Wealth Management, UBS Global Asset Management and UBS GT may be deemed to be "affiliated purchasers" ofthe issuer, as defined in Rule 100 of Regulation M. 17 As such, market activities of the UBS Affiliates will be subject to Rule 102 throughout the Restricted Period, except to the extentthat any ofthem acts as a "distribution participant" subject to Rule 101. While UBS IB. will not underwrite any New Shares, it will participate in both Offerings by acting as a global coordinator, joint bookrunner, principal subscription 16 The actual dates of events contemplated in relation to the Offerings described / above may vary. 17 . UBS IB would not qualify for the exception to the definition of "affiliated purchaser" because, among other things, it intends to act as a market maker and engage as a broker-dealer in solicited transactions in UBS Shares during the Restricted Period. LONDON:306201.2A

Division ofTrading and Markets -14 agent and settlement agent. Accordingly, UBS IB will be a "distribution participant" in the Offerings and its market activities will be subject to Rule 101 during the Restricted Period, at least until it completes its participation, after which it will be subject to Rule ~~- -~ .. _------H)'las-an--a-£filiat.ed-purGhas€r-until-th€-R-€-stfiGt€d-P-€ri0d-elld-s.-~Th:uswe-r'-(3quesE-re-lie-f-fef~ ._-~----: .~.~. the Market Activities under both Rules 101 and 102, whichever may apply~ Under both Rule 101 and Rule 102, the UBS Affiliates will not be permitted to bid for or purchase, or attempt to induce any person to bid for or purchase, UBS Shares during the Restricted Period unless one ofthe specified exceptions under the applicable rule is available. 18 There are no exceptions available under Rule 101 or Rule 102 that would permit the VBS Affiliates to engage in the Market Activities. Therefore, without the requested exemptive and/or no-action relief, the VBS Affiliates would not be permitted to engage in the Market Activities for an extendedperiod oftime, .which is likely to last approximately four weeks. UBS believes that the withdrawal of UBS IB as a principal market maker . in UBS Shares in the primary market for those shares, which are among the most actively traded on SWX Europe, for such an extended period oftime would have serious harmful effects in the home market, and, indirectly, in the U.S. market, for the UBS Shares. These effects could include a significant imbalance ofbuy and sell orders, particularly given the large number ofUBS Shares to be distributed in the Offerings, and thus greater volatility and reduced liquidity. As UBS IB is a principal market maker in derivatives on UBS Shares, if VBS IB is precluded from conducting market-making activities in the derivatives, the application of Regulation M could have serious adverse effects on the Swiss market for the derivatives, as well as on VBS IB'sability to manage hedge positions maintained by VBS IB and its customers previously established in connection with this activity. UBS IB and VBS Securities LLC may also be unable to execute brokerage orders in UBS Shares submitted by their customers in the normal course, therebyforcing their customers to take their orders elsewhere or to refrain from trading in UBS·Shares. It would be a significant burden onthese customers to require theQ1 to transfer their UBS . Shares to a securities account elsewhere or to have UBS IB or UBS Securities LLC place orders with another bank, in order to make trades with respect to UBS S,hares. 18 While derivatives on VBS Shares generally would n6t be "covered securities" under Regulation M, the derivatives market making that UBS IB conducts may, in some cases, be regarded as involving inducements to purchase uas Shares. To avoid uncertainty, we ask that the exemption and/or no-action relief we are requesting apply to the derivatives market making as well as the
derivatives hedging and other activities in VBS Shares described in this letter. ., i / LONDON:306201.2A

Division ofTrading and Markets -15
)

UBS Wealth Management alld UBS Global Asset Management have both fiduciary or similar duties under applicable laws to conduct their respective investment activities in the best interests oftheir respective clients. Accordingly, UBS Wealth --Management-antl-BBS-Glt>hal-Asset-Management--would-be-prohibited-from'tradingin---------- ---- -- - UBS Shares and derivatives on UBS Shares unless doing so complied with the terms ~d conditions that governed their relationships with their respective clients. UBS GT may also be unable to purchase UBS Shares in the open market to facilitate the grant of awards or the exercise of options pursuant to the terms ofUBS's employee share and option plans or to purchase UBS Shares from UBS's employee share -and option plans consistent with UBS GT's past practice and in accordance with 1,JBS's fiduciary duties arising from those plans. UBS believes that these activities will not have a significant effect on the market price ofUBS Shares.

• . .
  Regulation M normally would not interfere with market-making and other market activities in actively traded securities, such as the UBS Shares. However, because the UBSAffiliates are affiliated purchasers of the issuer, they cannot rely on the actively traded securities exception to do what market makers for large U.S. issuers are normally allowed to do during distributions by those issuers. For these reasons, UBSasks the Staff to provide an exemption from, or to confirm that the Staffwill not recommendthat the SEC take enforcement action under, Regulation M in connection with the continuation by UBS and the UBS Affiliates of the Market Activities during the Restricted Period, as perrriitted under market practice and applicable laws. .V. The Regylatory Market in the United Kingdom Trading of securities on SWX Europe is governed by U.K. rules on insider trading, price manipulations and market abuse, among other things. 19 The FSMA contains the main body ofrules relating to the financial markets inthe United Kingdom.. The FSA is an independent body that regulates the financial services industry in the United Kingdom. The FSA is responsible for market supervision and has a powerful enforcement amiory, including powers to investigate; publish information, censure, suspend the marketing ofsecurities and, above all, impose unlimited civil fines on both companies and individuals who have engaged in market abuse or required or encouraged another person to do so. Part VIII ofthe FSMA gives the FSA power to impose penalties upon any person who has engaged in market abuse or has required or encouraged another person to do so. Behavior caught by the market abuse regime falls into categories such as misuse ofinformation, conduct that is likely to mislead market participants and conduct that is likely to distort the market. 19 According to the Memorandum "Regulatory Framework for Issuers, Trading of SWX-listed Securities on virt-x" issued by SWX Europe, the Swiss rules may, however, apply concurrently. Those rules are described below under Section VI. ) LONDON:306201.2A

'.
Division ofTrading and Markets -16
Part VIn ofthe FSMA, which implements the Market Abuse Directive
(the "Directive"), is the principal source oflaw relating to market abuse in the United Kingdom. Section 118 ofthe FSMA specifies five types ofbehavior that are considered ------------ -----to-be-market-abus-e:- -- .---------------- ------------ --------.--.- -- - ---------------~-------- ------ ------ (i) . insider dealing:"- where an "insider" (as defined below) deals or attempts to deal in securities on the basis of "inside infonnation" (as defined below); (ii) improper disclosure-- where an insider discloses inside infonnation to someone else other than in the proper perfonnance oftheir duties; (iii) manipulating transactions -- where a transaction gives a false or misleading impression to the market ofthe supply, demand, price or value of a security or seCures the price of a security at anartificial level (unless the transaction is carried out for a legitimate reason and in confonnity with an "accepted market practice"); (iv) manipulating devices -- where a transaction employs a fictitious device or other fonnof deception or contrivance; and (v) misleading dissemination --where false or misleading infonnation is knowingly or negligently disseminated to the market. In addition, there are two residual categories that cover types ofbehavior not caught by one ofthe above categories but which involve either:
(i) the misuse ofrelevant infonnation that is not generally available to the market; or (ii) other fonns ofmisleading behavior or market distortion, in each case, that a regular user ofthe market in question would consider to be a failure to observe reasonable standards ofbehavior. "Inside infonnation" is defined as infonnation of a precise nature that is not generally available but which, ifmade generally available, would be likely to have a significant effect on the price ofthe company's securities. Infonnation is deemed likely to have a significant effect on price "if and only if it is infonnation of a kind which a reasonable investor would use as part ofthe basis for his investment decisions." In relation to the insider dealing and improper disclosure offenses of the market abuse regime, the definition ofinside infonnation is extended to include infonnation that is indirectly related to the company as well. This extends the definition to include, for )

LONDON:306201.2A

.:
Division ofTrading and Markets -17
" ) example, information, such as a change in tax treatment, which relates to a particular business sector that could impact the share price of all companies in that sector equally, in addition to information that relates solely to a specific issuer. An "insider" is a person .. ---~-~_ .. ··:..·..···---,---------whe---h·as-i-B-s-iae-iaf0rm.·atio,fl--as-a-res-1:11t-ef:-··;,,·····---- --..-, ...,.-.-----.--------..--.- ...'....O<••••• . •__~. • ••••••• . ••• __ • ---- .. - -•••• (i) membership of the administrative, management or supervisory board of a company that has securities admitted to trading; (ii) holding securities in such a company; (iii) his employment, profession or duties; (iv) any criminal activities; or (v) other means, but where he or she knows, or could reasonably be expected to know, that he or she holds inside information. Two safe harbors are expressly provided under the Directive for price￾stabilizing activities and repurchases of one's own shares. In addition, the Code of Market Conduct published by theFSA sets out conclusive guidance on the types ofbehavior that will not amount to market abuse. These broadly include:
(i) dealing with the benefitoftrading information, for example, where the inside information one holds is the knowledge that one is planning to deal; (ii) takeover activity,including stakebuilding, the seeking ofirrevocable undertakings and the making of arrangements to issue securities or offer cash as part of a takeover offer; . (iii) disclosure of inside information that is required by the Listing Rules, Disclosure Rules or Prospectus Rules; and (iv) behavior conforming with certain express provisions ofthe City Code on Takeovers and Mergers (the "Code"), provided the behavior is expressly"required or expressly permitted by the rule in question and the behavior also conforms with the General Principles under the Code. . The market abuse regime contained in Part VIII of the FSMA is . supplemented in the U.K. by Part V ofthe Criminal Justice Act 1993 (the "CJA"), which imposes criminal sanctions for insider dealing and market manipulation. Part V ofthe ) / LONDON:306201.2A

v
J
Oivision ofTrading and Markets -18
\
!
CJA contains two criminal offenses. The first offense, the "dealing" offense, is aimed at thosewho deal in particular kinds ofsecurities and in "specified circumstances" on the basis of "inside information." The second offense, the "tipping" offense, has two ----.-.-.~.. ·-··-p-ossibte-tim1:'~;-:--It-inommittOO:etfnet-15y-Qiscloslng-insi.Qeinrormafiorl"orbyencouraging--- -~---------- another to deal in particular kinds ofsecurities and in specified circumstances. The "specified circumstances" are that the dealing occurs on a regulated market or, that the person dealing relies on a professional intermediary or is himself a professional intermediary. Iri order to fall within the definition of "inside information" set out in the CJA, the information must:
(i) relate to a particular issuer or security; (ii) be specific or precjse; (iii) not have been made public; and (iv) ifit were to be made public, be likely to have a significant effect on the price of any security. There are some general defenses to these offenses, such as a reasonable belief that the information had been disclosed widely enough or, that the defendant did ) not expect dealing to result in a ,profit attributable to the fact that the information was price sensitive Or evidence that the recipient ofinSide information would have acted the same way without the information. The criminal offenses prescrIbed by Part V ofthe CJA can only be committed by individuals. However, any act on the part of a corporate body may be taken on its behalfby a director, officer or employee. SWX Europe also takes measures to ensure that information necessary to maintain a transparent market is made public. Order book executions are automatically reported by the trading system. During market hours, off-order book trades must be reported to SWX Europe as close to real time as possible and in any case within three . minutes of their execution. Transactions are automatically disclosed to all members. Trades executed offmarket hours must be reported to SWX Europe at the latest 15 minutes prior to the following trading day's opening.
VI. The Swiss Regulatory Market
In Switzerland, DBS's market activities are governed by the Swiss Federal Act on Banks and Savings Institutions, the Swiss Code of Obligations, the SESTA and the Swiss Penal Code. The SESTA covers, among other things, professional trading in securities and related disclosure. Based on the authority conferred by the SESTA, the SWX oversees trading actiyities, i.~., price formation, conclusion and execution of transactions to ensure that insider trading, price manIpulation and other breaches oflaw may be detected. The SWX possesses a Surveillance Office, which has responsibility for ) LONDON:306201.2A

Division ofTrading and Markets -19 market supervision and for reporting suspected breaches of the law to the Swiss Federal Banking Commission (the "SFBC"), which coordinates investigations. If the SFBC becomes aware of potential criminal offenses, it is mandated to so notify the prosecuting --------.. --authorlttesimme<Harety:----.--------.----....-....-.-.-. .....-..------.-.---.....-..-.- --~---.------ ..----- Insider trading and price manipulation in Switzerland are criminal offenses prohibited under Articles 161 and 161bis ofthe Swiss Penal Code. Specifically, criminal sanctions are imposed if, among others:
(i) a member of the board of directors, the management or the auditors or an agent of a company, a company controlling or a company under the control of such company (each a "Relevant Person"), or an auxiliary of a Relevant Person abuses or .. disseminates a confidential fact that·relates to a forthcoming issuance of new equity securities, a merger or a similar event of comparable significance, the dissemination of which is likely to significantly influence the price ofshares, other securities or value-rights of a company or ofoptions on such instruments (provided such instruments are traded on the principal or pre￾market ofa Swiss exchange); or . (ii) a person who directly or indirectly obtains knowledge of such· flict.from a Relevant Person abuses such information; or (iii) a personkno'wingly disseminates misleading information; or (iv) a person carries out transactions in securities directly or indirectly on his or her own account, or for the accounts of persons linked together for that purpose (this includes fraudulent techniques such as wash sales and matched orders), and, inboth (i) and (ii) above, the offender realizes or at least tries to realize a gain for himself or herself or a third person, and in (iii) and (iv) above, the offender intends to significantly affect the prices ofsecurities traded on a Swiss stock exchange to procure an illegitimate gain for himself or herself or a third person. In addition, the SWX General Rules (the "General Rules") that are binding upon UBS as a participant ofthe SWXprohibit sham transactions, i.~., transactions that do not have any commercial significance, including wash trades, improper matched orders or in-house crosses on the trading book. If an SWX participant violates stock exchange laws or regulations, breaches contractual agreements entered into with the . SWX, including the General Rules, or engages in unfair trading activities, the SWX may impose sanctions consisting of, among others, a reprimand, suspension or withdrawal of ) / LONDON:30620 1.2A

pivisionofTrading and Markets -20
)
/ the license as a participant, and a fine or contractual penalty ofup to CHF 10 million. The SWX is entitled to publish sanctions and the reasons for imposing them. -------------- ----_·--------------·Broker-dealerrin-Switzerland-are-requiredto-keep-a-daity-record-of-orders-------------- received and transactions carried out, in which allinfQrmation necessary to enable the reconstruction ofthe transactions and the supervision of the related operations must be recorded. As a rule, all on- and off-exchange transactions relating to securities of Swiss or foreign companies that are admitted to trading on a Swiss exchange, whether carried out in Switzerland or abroad, must be reported. This applies also to securities of Swiss companies that are listed on SWX and traded on SWX Europe. Under the SWX rules, on-exchange transactions are automatically reported by the trading system. During market hours, off-exchange transactions that are not automatically reported by the trading system must be reported to SWX within thirty minutes of their execution. Transactions executed outside market hours must be reported to SWX prior to the following trading day's opening at the latest. The SWX also takes measures to ensure that information necessary to . maintain a transparent market is made public. This applies, in particular, to prices and volumes oflisted securities traded on and offthe SWX.
VII. Relief Requested
As discussed above, UBS is asking the Staff to grant exemptive relief from, or to confirm that the Staffwill not recommend that the SEC take enforcement action under, Rule 101 and Rule 102 ofRegulation M in connection with the continuation by UBS and the UBS Affiliates to engage in the Market Activities. UBS and the UBS Affiliates would conduct these activities in the ordinary course oftheir respective businesses and in accordance with applicable law in the U.K., Swiss and other non-U.S. markets, all as described in this letter. UBS also asks for relief to permit UBS Securities LLCto engage in unsolicited brokerage activities, and to permit VBS Wealth Management and UBS Global Asset Management to continue trading UBS Shares and derivatives on UBS Shares, in each case in the normal course ofbusiness in the United States as described in this letter. As a condition to the relief being requested, UBS will include disclosure in the offering documents that will be distributed to U.S. investors that participate in the Offerings. The disclosure will be substantially as follows:
"During the distribution ofUBS Shares in the Rights Offering and the Global Offering, if applicable, UBS and certain ofits affiliates intend to engage in various dealing and brokerage activities involving UBS Shares when and to the extent permitted by applicable law. Among other things, UBS -and certain ofits affiliates, as the case may be, intend (1) to make a market in UBS Shares by purchasing and selling UBS Shares for their own account or to facilitate customer ) LONDON:30620 1_2A

Division ofTrading and Markets -21- . transactions; (2) to make amarket, from time to time, in derivatives (such as options, warrants, convertible securities and other instruments) rel~ting to uas Shares for their own account and the accounts of their customers; (3) to engage in --------··-·--:-···-···-----------traues-irr-tJFls-sharesfor1"h-ett-own-accOunr-arfd"lne-accQulffs of-tl1eir customers-~'- ...------ for the purpose ofhedging their positions established in connection with the derivatives market making described above; (4) to engage in unsolicited brokerage transactions in UBS Shares with their customers; (5) to trade in UBS Shares and derivatives on UBS Shares as part of their investment management activities for the accounts oftheir customers; and (6) to trade in uas Shares in connection with employee incentive plans. These activities may occur on SWX Europe,Chi-X, Scoach, in the over-the-counter market in Switzerland or elsewhere outside the United States ofAmerica. In addition, when and to the extent permitted by applicable law, uas's affiliated U.S. broker-dealer, UBS Securities LLC, may engage in unsolicited brokerage transactions in UBS Shares, and UBS's investment management business groups may trade in UBS Shares and derivatives on UBS Shares, in the United States ofAmerica. UBS and its affiliates are not obliged to make a market in or otherwise purchase UBS Shares or derivatives on UBS Shares and any such market making or other purchases may be discontinued at any time. These activities could have the effect ofpreventing or retarding a decline in the market price ofUBS Shares." As a further ·condition to the reliefbeing requested, VBS will undertake to keep records (the "Records"}ofthe date and time at which UBS Shares are purchased or sold, the market in which the purchase or sale is effected, the amount ofUBS Shares purchased or sold and the price ofthe purchase or sale, for each purchase or sale ofUBS . Shares that the UBS Affiliates make during the Restricted Period (this information will not include any client-specific data the disclosure ofwhich is restricted under local law).. UBS will maintain the Records for a period oftwo years following the end ofthe Restricted Period. Upon the written request ofthe Director ofthe Division ofTrading and Markets ofthe SEC, UBS will make the Records available at the SEC's offices in Washington, D.C. In connection with the relief requested by VBS in this letter, please note that similar exemptive and/or no-action relief from Regulation,M was granted to VBS under your exemptive letter of September 22, 2000,20 to Allianz AG under your exemptive letter of April 10, 2003,21 to The Royal Bank of Scotland Group pIc under 20 See 2000 SEC No-Act. LEXIS 915. 21 See 2003 SEC No-Act. LE:~IS 845. ) LONDON:306201.2A

Division ofTrading and Markets -22
) your exemptive letter ofJuly 23,2007,22 to Barclays PLC under your exemr,tive letter of August 7, 200723 and to UBS under your no-action letter ofApril 22, 2008. 4 .- . -...- ... ._ ..-----..---------.__.--------- ._ ..-..._ __ .~----------*--. __ . -------_ - ------..- -_.- - - ..---------- If you have any questions about this request, please do not hesitate to contact me (+44-20-7959-8575) or David Harms (212-558-3882) in our New York office. We appreciate your assistance in this matter. Very truly yours, 4;) David B. Rockwell cc:- Paul Dudek, Esq.

(Division ofCorporation Finance

Securities and Exchange Commission)

Jean-Pierre Mathey

Louis Eber

Niall O'Toole

Dr. Dieter Probst

Christian Helbling

Dr. Sebastian Harsch

(DBS AG)

. bcc: Michael Wiseman
David Harms
Rebecca J. Simmons
(Sullivan & Cromwell LLP)
22 See 2007 SEC No-Act. LEXIS 545.
23 See 2007 SEC No-Act. LEXIS 555.
24 See 2008 SEC No-Act. WL 1952022.
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