SEC Settles with UBS Over Losses in the Willow Fund, a UBS Proprietary Alternative Investment

UBS has agreed to pay $17.5 million to settle charges from the U.S. Securities and Exchange Commission that the UBS Willow Fund changed its investment strategy focused on distressed debt without informing investors and subsequently lost over 80% of its value.  However, investors have lost millions of dollars which has not been recovered.  UBS Willow Management LLC and UBS Fund Advisor LLC agreed to be censured and some of the funds will be returned to investors for restitution.  However, most investors will only receive a de minimis amount of their entire loss.  Some investors have already pursued securities arbitration claims against UBS for allegedly misrepresenting the fund.

According to the SEC, UBS Willow Management, made investments in the UBS Willow Fund from 2000 through 2008 that were consistent with a strategy described in its offering and marketing materials, which was based on the debt increasing in value.

Problems with the fund began in 2008 when UBS Willow Management shifted the fund’s investments to include large quantities of credit default swaps, a bet that the value of the related debt would decline, without adequately disclosing the shift in investment strategy, the SEC claimed.

UBS liquidated the Willow fund in 2012 after it suffered massive losses relating to its credit default swaps holdings, which represented a substantial part of the Fund’s holdings by March of 2009 from less than 2.6% in 2008, the SEC said. The SEC also alleged that UBS Fund Advisor was aware of the change in investment strategy and failed to supervise UBS Willow Management adequately.

Willow Fund investors may pursue FINRA arbitration claims against UBS for their losses alleging, amongst other matters, that UBS failed to properly advise the investors of this change in strategy and further kept many financial advisors in the dark.  UBS served as the manager, advisor and primary seller of the Fund to investors promoting its global expertise. However, investors were required to custodian the Willow Fund at UBS making it a captured product at UBS.

If you invested money in the UBS Willow Fund, you may be entitled to recover some of your investment losses. Please call our securities law firm toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.