UBS Offers Fig Leaf To FAs And Clients

UBS is trying to address two of its thorniest problems: angry investors who hold frozen auction-rate securities, and angry financial advisors who are leaving because they feel the firm has lost the plot—or simply because they want those fat recruiting bonuses being offered by rival firms.

UBS is trying to address two of its thorniest problems: angry investors who hold frozen auction-rate securities, and angry financial advisors who are leaving because they feel the firm has lost the plot—or simply because they want those fat recruiting bonuses being offered by rival firms.

Apparently, enough successful financial advisors have left UBS in the past 12 months that management promised last week that better pay was on the way ... in 2009. According to a report in today’s New York Post, FAs with $400,000 in trailing 12-months' production or more have been promised an increase of 1 percent to 2 percent in their payout starting next year. A UBS spokesman would not comment on the validity of the report. (For more on turnover at the wirehouse firms, See Registered Rep.’s June feature story, Morgan’s Magic.)

Meanwhile, UBS clients stuck holding illiquid auction-rate securities may finally get some relief. (See Registered Rep.’s May cover story, A False Sense of Security for more on the issue and one particular UBS client’s ordeal.) UBS is offering a plan to unfreeze the $3.5 billion its clients currently hold in one particular ARS market: auction-rate preferred shares issued by closed-end tax-exempt mutual funds. In an announcement made yesterday, the firm said it is “actively developing a structure” to buy back these shares from UBS clients at par value.

The ARS market—frozen since February after UBS, Merrill, Goldman Sachs, Citigroup and others walked away from the market they created and kept afloat—has thawed somewhat in recent months, but not for the trickiest versions of the securities.

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