UBS AG, the biggest wealth manager, was targeted by a whistleblower suit from a former employee who said the bank forced him to resign after he assisted regulators probing auction-rate securities sales in Massachusetts.
Flynn, who was a senior vice president at UBS, sold $30 million of auction-rate securities in around two years. UBS violated securities laws by failing to disclose to him and his clients that auction rate securities weren't truly cash equivalents, as they'd claimed, and sometimes couldn't be traded, he said in the complaint.
Massachusetts Secretary of State William Galvin sued UBS on June 26 for fraud relating to the bank's sale of auction-rate securities to investors in the state and for allegedly telling them the bonds were safe and liquid. UBS said it "will defend the specific allegations.''
Municipalities, student loan corporations and closed-end mutual funds issued about $330 billion in auction-rate bonds and preferred shares before the market collapsed in February.
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