UBS

UBS Settles New York AG RMBS Claims for $230M

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On March 20, 2018, UBS entered into a $230 million settlement with the New York Attorney General to resolve allegations against UBS under New York’s Martin Act and Executive Law arising from the creation, packaging, structuring, underwriting, issuance, and sale of fifteen residential mortgage-backed securities sponsored by UBS in 2006 and 2007. The settlement agreement sets aside $189 million for New York homeowners and $41 million for the state, and an agreement by UBS to acknowledge certain facts relating to its alleged misconduct between 2006 and 2007. Settlement Agreement

SDNY Court Appoints Lead Master to Review 9,300 UBS Loans for Material Breach Following UBS Putback Trial

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On September 6, 2016, following a 3-week long bench trial in May, U.S. District Judge P. Kevin Castel of the Southern District of New York held that he will appoint a Lead Master to determine whether there are “material breaches” in 9,300 loans at issue in putback litigation against UBS. In its 239-page post-trial decision, after addressing a number of issues and discussing 20 loans, the Court appointed a Lead Master to examine each loan on an individual basis and prepare recommended findings and conclusions on liability.

The Court outlined Plaintiff’s burden of proof for breach of underwriting guidelines, holding that the Plaintiff must demonstrate it is more likely than not that the loan was not originated in compliance with the relevant underwriting guidelines, unless an exception was actually exercised, in a reasonable manner, at the time of origination. Plaintiffs will then be required to prove a breach has a “material and adverse” effect at the time UBS’s repurchase obligation was triggered. The Court held this can be shown: (1) by proving an increased risk of loss to certificateholders; (2) with evidence that a breach resulted in altered loan terms; or (3) through a showing of layered risk and/or the cumulative effect of multiple breaches. The Court held that discovery of a breach cannot be based on constructive knowledge. Instead, Plaintiffs must show actual knowledge, which may be established by circumstantial evidence, or willful blindness. Memorandum and Court Order.

New York Court Dismisses Repurchase Claims Against UBS as Untimely

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On July 27, 2016, Justice Marcy Friedman of the New York Supreme Court for New York County, in accordance with other recent decisions (covered here and here) dismissed an action against UBS Real Estate Securities, Inc.  The case was initially brought by Federal Housing Finance Agency (“FHFA”), as conservator of an RMBS certificateholder.  It was then pursued by the trustee after the limitations period expired.  Because FHFA lacked standing to bring claims for breaches of loan-level representations and warranties, the Court held that the trustee’s claims do not “relate back” to the date of FHFA’s initial filing for statute of limitations purposes.  The court will permit briefing on the viability of claims for failure to notify the trustee of alleged breaches of representations and warranties.  Decision.

Agencies Extend Deadline for Certain Foreign Banking Organizations’ Resolution Plan Submissions

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On June 8, 2016, the Federal Reserve Board and the Federal Deposit Insurance Corporation extended the deadline for Barclays PLC, Credit Suisse Group, Deutsche Bank AG, and UBS to present their upcoming resolution plans to July 1, 2017, as a result of these entities engaging in restructuring in order to be in “compliance with the Federal Reserve Board’s Intermediate Holding Company (IHC) requirement[.]” Press release.  Press release.

UBS and Capital Ventures Settle RMBS Dispute

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On March 26, Capital Ventures International and several UBS affiliates filed a stipulation of dismissal after reaching a settlement disposing of all claims in the action.  The terms of the settlement are undisclosed.  Capital Ventures had sued UBS for alleged violations of the Massachusetts Uniform Securities Act in connection with $131 million in RMBS that Capital Ventures allegedly purchased from UBS.  Stipulation.

Citigroup, Goldman, and UBS to Pay $235 Million Settlement in MBS Class Action

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On February 13, 2015, the plaintiffs in New Jersey Carpenters Health Fund, et al., v. Residential Capital, LLC, et al., No. 08-cv-8781 (S.D.N.Y.) filed an unopposed motion for certification of the class and to approve a preliminary settlement.  The complaint, originally filed in 2008, included claims for materially false and misleading statements in securities offering documents under the Securities Act of 1933 against Citigroup, Goldman Sachs, and UBS as underwriters for 16 mortgage-backed securities transactions in 2006 and 2007.  The class consists of investors who purchased the certificates, with the majority of the settlement funds set aside for investors who purchased their certificates within ten days after the relevant initial offering.  The proposed $235 million settlement does not include a $100 million settlement with Residential Capital, LLC that had previously been reached in the case.  Motion.

UBS Motion to Dismiss RMBS Suit Granted in Part

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On June 10, Judge Denise Cote of the U.S. District Court for the Southern District of New York granted in part and denied in part UBS’s motion to dismiss a lawsuit filed against it by the National Credit Union Administration, as liquidating agent for Southwest Corporate Federal Credit Union and Members United Corporate Federal Credit Union.  The credit unions each owned certain RMBS issued by UBS.  Following her ruling in an earlier case NCUA brought against Morgan Stanley, Judge Cote dismissed NCUA’s federal Securities Act claims as time barred.  Judge Cote denied UBS’s motion to dismiss NCUA’s claims under Illinois and Texas Blue Sky Laws, holding that NCUA had satisfied the liberal pleading standard by making the requisite “originator-specific allegations” to support its claims that UBS made material misrepresentations regarding whether the originators had complied with underwriting guidelines.  Order.

UBS Settles RMBS Lawsuit

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On April 21, Union Central Life Insurance Co., Ameritas Life Insurance Corp. and Acacia Life Insurance Company, on the one hand, and UBS AG, UBS Securities LLC and Mortgage Asset Securitization Transactions, Inc., (collectively, UBS), on the other, filed a motion in the United States District Court for the Southern District of New York seeking voluntary dismissal based on the fact that they had reached a settlement.  The settled action related to alleged misstatements by UBS relating to RMBS sold to the three insurance company plaintiffs.  The settlement agreement was reached on March 5, 2014, and the parties now seek, in addition to voluntary dismissal, a bar order relating to UBS.  The terms of the settlement were not disclosed.  Motion.

European Commission Imposes EUR 1.71 Billion Fine for Participating in Illegal Cartels

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On December 4, the European Commission announced that it had fined eight international banks a total of more than 1.7 billion for their participation in illegal cartels in markets for financial derivatives covering the European Economic Area.

Using the cartel settlement procedure, the Commission reached two separate decisions; one decision involved seven separate bilateral infringements relating to interest rate derivatives denominated in Japanese yen.  The companies involved were UBS, RBS, Deutsche Bank, JPMorgan, Citigroup and RP Martin.

The other decision was made in relation to a collusion by four banks in relation to interest rate derivatives denominated in euro.  The banks were Barclays, Deutsche Bank, RBS and Société Générale.  Utilizing the Commission’s 2006 Leniency Notice, Barclays and UBS received complete immunity from fines.  Announcement.

Third Circuit Affirms Dismissal of Securities Class Action Against UBS

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On September 17, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal, as time-barred, of a class action brought by RMBS certificateholders against UBS over losses related to the RMBS.  Filing suit in February 2010, the Plaintiffs alleged that UBS made misrepresentations in the RMBS offering documents concerning the mortgage loan originators’ compliance with their underwriting guidelines, the appraisal practices used in appraising the underlying properties and the loan-to-value ratios of the mortgage loans.  Plaintiffs asserted claims under Sections 11, 12(a)(2) and 15 of the Securities Act.  The Third Circuit held that Plaintiffs’ claims were time barred by the one-year statute of limitations provided by Section 13 of the Securities Act.  Under the “discovery rule,” which the court held applies to Section 13, the statute begins to run on the date that a plaintiff did in fact discover, or reasonably should have discovered, the facts constituting the alleged violation.  The court concluded that a reasonably diligent plaintiff would have begun investigating claims in connection with its certificates by September 2008, when a class of plaintiffs, including the lead plaintiff here, filed a separate suit against UBS (among others) making allegations similar to those in this case.  The court further concluded that a reasonably diligent investigation conducted at that time would have led to knowledge of the claims asserted more than one year before the lawsuit was filed.  Decision.