Coakley found that the brokerage firm had not fully disclosed the risks of the investments, called auction-rate securities, The Boston Globe reports. Cities were unable to get their money when the market for these investments failed almost overnight.
The settlement was the first admission by UBS or any U.S. brokerage that something may have been amiss in the sales of municipal debt securities, according to the news report. The market for these securities relied on weekly and monthly auctions run by brokerage firms, and the market failed when the auctions began attracted only sellers and no buyers in February.
UBS spokeswoman Karina Byrne told The Globe the settlement was a one-time event, based on a state law that requires towns and cities keep cash in only highly liquid accounts that are readily accessible. Byrne said the agreement addressed the Attorney General’s finding that the securities were “not permissible” in municipal accounts.