WASHINGTON (CN) – UBS Securities will pay $8 million and hire an independent consultant to settle an SEC complaint of inaccurate recording practices on customers’ short sales.
The SEC busted UBS for “inaccurate recording practices when providing and recording ‘locates’ to customers seeking to execute short sales,” the commission said in a statement announcing the settlement.
“Broker-dealers are routinely asked by customers to locate stock for short selling, and a ‘locate’ represents a determination by a broker-dealer that it has borrowed, arranged to borrow, or reasonably believes it could borrow the security to settle the short sale,” according to the SEC statement. “Broker-dealers are required under Regulation SHO to accurately record the basis upon which it has given out locates.
“According to the SEC’s order instituting settled administrative proceedings, UBS employees routinely recorded the name of a lender’s employee even when no one at UBS had actually contacted the employee to confirm availability. The SEC’s investigation found that UBS employees sourced thousands of locates to lender employees who were out of the office and could not have provided any information to UBS on those days.”