Alert December 26, 2012

UBS Fined an Aggregate of $1.5 Billion by Global Regulators for Manipulation of Libor, Euribor and Other Interest Rate Benchmarks

The large Swiss banking organization, UBS AG (“UBS”) agreed to pay an aggregate of approximately $1.5 billion in fines and other penalties (the “Aggregate Fine”) to regulators in the U.S., the U.K. and Switzerland to resolve claims that they manipulated the London Interbank Offered Rate (Libor) and other interest rate benchmarks.  These interest rate benchmarks are tied to the pricing and values of trillions of dollars of corporate and consumer loans, derivatives and other financial products.  The settlements include agreements with the U.S. Department of Justice (“DOJ”), the Commodity Futures Trading Commission (“CFTC”), the U.K.’s Financial Services Authority (“FSA”) and the Swiss Financial Market Authority.  No criminal charges were filed by the DOJ against UBS A.G., the parent holding company.  A Japanese subsidiary of UBS, UBS Securities Japan Co., Ltd. (“UBS Japan”), agreed to plead guilty to one count of felony wire fraud as part of the overall settlement.  Separately, the DOJ announced that it had commenced an action charging two former UBS traders with conspiracy wire fraud and price fixing in connection with their alleged attempts to manipulate the Yen Libor.

DOJ Actions

UBS entered into a non-prosecution agreement with the DOJ under which UBS agreed to pay $500 million of the Aggregate Fine, and to cause UBS Japan to plead guilty to one count of wire fraud.  As noted above, separately, the DOJ filed a criminal complaint against two former UBS traders.

CFTC Action

The CFTC issued an order against UBS AG and UBS Japan citing their role in manipulating Libor, Euribor, and certain other interest rate benchmarks.  The order requires the UBS entities to pay a $700 million civil monetary penalty (part of the Aggregate Fine) and to take certain steps to ensure the integrity and reliability of UBS’s future benchmark interest rate submissions.

U.K. and Swiss Actions

Furthermore, in related actions by oversees regulators, the United Kingdom’s Financial Services Authority imposed a £160 million British Pounds (approximately $259.2 million) penalty), which is part of the Aggregate Fine, and the Swiss Financial Market Authority ordered UBS to disgorge 59 million Swiss Francs (approximately $64.3 million) (as part of the Aggregate Fine).