UBS AG just agreed to pay back about $35 million to Massachusetts cities and other government entities that bought the now frozen auction-rate securities.
After auction-rate securities soured in February, Massachusetts regulators began investigating UBS for evidence of the bank misleading municipalities on whether auction-rate securities were permissible investments for municipalities under state law.
Under this payback agreement, UBS will purchase at par value the principal of the securities from the Massachusetts municipalities. And UBS now says that, under state law, the municipalities were not supposed to buy auction-rate securities. However, UBS is not in discussions with other states for a similar agreement and this agreement does not apply to individual investors.
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