A former top UBS AG
David Shulman, who had been UBS' global head of municipal securities and head of fixed income for the Americas, agreed to pay the civil fine to the state and be suspended from working for or with broker-dealers through January 2011. UBS had suspended him in July 2008.
Cuomo accused Shulman of ordering his broker on December 13, 2007, to immediately sell his $1.45 million of student loan auction-rate securities, after learning between December 11 and 13 that UBS's market for the securities was distressed and that upcoming auctions could fail.
The attorney general said the broker sold the securities directly to UBS's short-term trading desk, which was under Shulman's supervision, and mentioned Shulman by name when he called to place the trades.
Cuomo said Shulman was UBS' top executive with day-to-day responsibility for the Swiss bank's auction-rate program.
While thousands of UBS customers received no warning about the auction-rate securities market's serious distress, David Shulman, one of the company's top executives, used insider information to take the money and run, Cuomo said in a statement. When corporate executives unlawfully take advantage of their positions, we will hold them accountable.
Cuomo accused Shulman of violating the state's Martin Act. Shulman did not admit wrongdoing in settling. His lawyer Robert Anello did not immediately return a call seeking comment.
The settlement is the second that Cuomo's office has reached with a former UBS executive in the matter.
David Aufhauser, who had been general counsel at UBS' investment bank and at the U.S. Treasury Department, reached a $6.5 million settlement with Cuomo in October 2008 and accepted a two-year ban from the securities industry.
UBS is one 13 broker-dealers to settle with Cuomo over sales of auction-rate securities, whose rates reset periodically at auctions.
The $330 billion market froze in February 2008 when dealers stopped supporting it and has yet to recover. The settlements have resulted in the repurchase of more than $60 billion of securities from investors, Cuomo said.
UBS spokeswoman Kelly Smith said on Thursday UBS' August 2008 settlement with Cuomo committed the bank to making its private, corporate and institutional clients whole.
(Reporting by Jonathan Stempel; editing by John Wallace and Andre Grenon)