SEC no-action letter: UBS Financial Services Inc. waiver of Regulation A and Regulation D disqualifications

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20S49
DIVISION OF
CORPORATION FINANCE May 9, 2011
Kenneth J. Berman, Esq.
Debevoise & Plimpton LLP
555 13th Street, N.W.

Washington, DC 20004

Re: SEC v. UBS Financial Services Inc., Civil Action No. 11-2539 (D.N.J.) Waiver Request under Regulation A and Rule 505 of Regulation D Dear Mr. Berman:
This responds to your letter dated today, written on behalf of UBS Financial Services Inc. and constituting an application for relief under Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D under the Securities Act of 1933. You requested relief from disqualifications from exemptions available under Regulation A and Rule 505 that arose by reason of the Judgment as to UBS Financial Services Inc. filed on May 6, 2011 and entered on May 9, 2011 by the United States District Court for the District ofNew Jersey in SEC v. UBS Financial Services Inc., Civil Action No. 11- 2539 (the "Judgment"). The Judgment permanently restrains and enjoins UBS Financial Services Inc. from violating, directly or indirectly, Section 15(c) of the Securities Exchange Act of 1934 by means of a manipulative, deceptive or other fraudulent device or contrivance, and orders it to disgorge profits gained as a result ofthe conduct alleged in the complaint to have violated said
Section 15( c) and pay a civil penalty in the amount of $32,500,000.
For purposes ofthis letter, we have assumed as facts the representations set forth in your letter and the findings supporting entry of the Judgment. We also have assumed that UBS Financial Services Inc. will comply with the Judgment. On the basis of your letter, pursuant to delegated authority, I have determined that you have made showings of good cause under Rule 262 and Rule 505 that it is not necessary under the circumstances to deny the exemptions available under Regulation A and Rule 505 by reason of entry of the Judgment. Accordingly, UBS Financial Services Inc. is granted relief and the disqualifications from such exemptions that arose by reason of entry ofthe Judgment are waived. Very truly yours, ~~p.X~ ~:FOffice of Small Business Policy

DEBEVOISE & PLIMPTON LLP 919 Third Avenue
New York, NY 10022
Td 212 909 6000
Fax 2129096836 www.debevoise.com
May 9, 2011
VIA FIRST CLASS MAIL AND E-MAIL
Gerald J. Laporte, Esq.
Chief, Office of Small Business Policy
Division ofCorporate Finance
U.S. Securities and Exchange Commission
100 F Street, N.E., 3rd Floor
Washington, D.C. 20549-3628
Securities and Exchange Commission v. UBS Financial Services Inc., Case No. 11-cv-2S39-WJM (D.N.J. May 6,2011) Dear Mr. Laporte:
We submit this letter on behalf of our client, UBS Financial Services Inc. (the "Settling Firm"), I the settling defendant in the above-captioned civil proceeding, which was filed on May 4, 2011. The Settling Firm hereby requests, pursuant to Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C) of Regulation D ofthe Securities and Exchange Commission (the "Commission") promulgated under the Securities Act of 1933 (the "Securities Act"), waivers of any disqualifications from exemptions under Regulation A and Rule 505 of Regulation D that may be applicable to the Settling Firm or any other person as a result ofthe entry of a Judgment against the Settling Firm (the "Judgment"), which is described below. The Judgment was issued on May 6, 2011 and entered into the docket on May 9, 2011? The Settling Firm requests that these waivers be granted effective as ofthe date of The Settling Firm was known as UBS PaineWebber during a large portion ofthe time period during which the allegations described below occurred. Securities and Exchange Commission v. UBS Financial Services Inc., Case No. ll-cv-2539-WJM (D.NJ. May 6, 2011). New York • Washington, D.C. • London • Paris • Frankfurt • Moscow • Hong Kong • Shanghai 2

the Judgment. It is our understanding that the Staff ofthe Division of Enforcement (the '"Staff') does not oppose the grant ofthe requested waivers. BACKGROUND The staff ofthe Division of Enforcement engaged in settlement discussions with the Settling Firm in cOIli1ection with the above-captioned civil proceeding, which was brought alleging violations of Section 15(c) ofthe Securities Exchange Act of 1934 (the '"Exchange Act"). As a result ofthese discussions, the Settling Firm submitted an executed Consent ofthe Defendant UBS Financial Services Inc. (the '"Consent") when the Commission filed its complaint against the Settling Firm in a civil action. In the Consent, solely for the purpose ofproceedings brought by or on behalf ofthe Commission or in which the Commission is a party, the Settling Firm agreed to consent to the entry ofa final judgment as described below, without admitting or denying allegations made in the above-captioned proceeding. The allegations in the proceeding relate to the conduct of certain former employees ofthe Settling Firm with respect to the temporary investment of proceeds of municipal securities in reinvestment products such as guaranteed investment contracts, repurchase agreements, and forward purchase agreements. BegiIli1ing in 2000 and continuing through 2004, the former employees are alleged to have participated in conduct in connection with the competitive bidding for these products that involved the steering ofbusiness to the Settling Firm and the submission ofpurposefully non-wiIli1ing bids in the Settling Firm's capacity as a reinvestment provider, and the steering of business to other firms in the Settling Firm's capacity as a bidding agent. These practices are alleged to have affected the prices for certain ofthe reinvestment products at issue and the certifications required under applicable Treasury regulations. The Judgment, among other things, restrains and enjoins the Settling Firm and its agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice ofthe Judgment from violating, directly or indirectly, Section 15(c) ofthe Exchange Act. Additionally, pursuant to the Judgment, the Settling Firm was ordered to pay disgorgement of and prejudgment interest of $14,707,180.00 to the Commission as well as a civil penalty of$32,500,000.00. DISCUSSION The Settling Firm understands that the entry ofthe Judgment against it could disqualify it and other persons from participating in certain offerings otherwise exempt under Regulation A and Rule 505 ofRegulation D promulgated under the Securities Act, insofar as the Settling Firm was disqualified pursuant to 17 C.F.R. §§ 230.262(a)(4) or (b )(2). The Commission has the authority to waive the Regulations A and D exemption disqualifications upon a· showing of good cause that such disqualifications are not necessary under the circumstances. See 17 C.F.R. §§ 230.262 and 230.505(b)(2)(iii)(C). UBSRegAJD 2

The Settling Firm requests that the Commission waive any disqualifying effects that entry of the Judgment against it may have under Regulation A and Rule 505 of Regulation D with respect to the Settling Firm and other persons on the following grounds:

1. The Settling Firm's conduct addressed in the Judgment and alleged in the
   Complaint does not relate to offerings under Regulation A or Rule 505 of Regulation D. Furthennore, we note that the conduct occurred over five years ago, the personnel at the Settling Finn who were involved in the violations alleged in the Complaint are no longer employed by the Settling Firm, and the business unit in which the fonner employees were employed was closed by the Settling Finn in June 2008.
2. The Settling Finn has cooperated with the Division ofEnforcement in the
   investigation ofthis matter and agreed to injunctive relief and monetary payments.
3. The disqualification ofthe Settling Finn, its affiliates or other persons from the
   exemptions under Regulation A and Rule 505 of Regulation D would be unduly and disproportionately severe given that the Judgment fully addresses the activity alleged in the Complaint through injunctive and other relief.
4. The disqualification may affect the business operations ofthe Settling Finn, its
   issuer affiliates, and third party issuers by impairing their ability to issue securities pursuant to these exemptions to raise new capital or for other purposes. In addition, the disqualification may place the Settling Finn or its affiliates at a competitive disadvantage with respect to third parties. In light of the grounds for relief discussed above, we believe that disqualification is not necessary, in the public interest, or for the protection of investors, and that the Settling Finn has shown good cause that relief should be granted. Accordingly, we respectfully request the Commission to waive, effective as of the date ofthe Judgment, the disqualification provisions in Regulation A and Rule 505 of Regulation D to the extent that they may be applicable as a result ofthe entry ofthe Judgment. 3 We note in support ofthis request that the Commission has in other instances granted relief under Rule 262 of Regulation A and Rule 505(b)(2)(iii)(C} of Regulation D for similar reasons. See, e.g., Citigroup Inc., SEC No-Action Letter (pub. avail. Oct. 19,2010); Evergreen Investment Management Co., LLC, SEC No-Action Letter (pub. avail. June 8, 2009); UBS AG, SEC No-Action Letter (pub. avail. Mar. 19,2009); Citigroup Global Markets, Inc., SEC No-Action Letter (pub. avail. March 23, 2005); Morgan Stanley & Co. Incorporated, SEC No-Action Letter (pub. avail. Feb. 4, 2005); Lehman Brothers Inc., SEC No-Action Letter (pub. avail. Oct. 31,2003); Citigroup Global Markets Inc., flklal Salomon Smith Barney Inc., SEC No. Action Letter (pub. avail. October 31,2003); and Credit Suisse First Boston Corporation, SEC No-Action Letter (pub. avail. Jan. 29,2002). UBSRegAID 3

Please do not hesitate to call the undersigned at (202) 383-8050 regarding this request. Very truly yours, ~~!ll-- Kenneth lB;rman UBSRegAID 4