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August 8, 2008 5:22 PM

Debevoise & Plimpton on $19.4 Billion UBS Auction-Rate Securities Settlement

Posted by Nicole White

Swiss bank UBS AG announced Friday that it will buy back $19.4 billion in failed auction-rate securities and pay a fine of $150 million to Massachusetts and New York.

UBS agreed to repurchase the securities in a settlement with New York Attorney General Andrew Cuomo, Massachusetts Secretary of State William Galvin, the Securities and Exchange Commission (SEC), and other state regulatory agencies represented by North American Securities Administrators Association. The bank was represented by Debevoise & Plimpton partner Mary Jo White, chair of the firm's litigation department.

The UBS settlement is the third and largest agreement by a financial institution to buy back frozen securities in response to state and federal regulatory investigations, following Citigroup, Inc. and Merrill Lynch. As reported yesterday in The Am Law Daily, Citi agreed to buy back more than $7 billion in frozen auction-rate securities from its customers and to pay some $100 million in civil penalties to settle state and federal regulators' claims that it misled clients about the risks of the financial products. Hours later, Merrill Lynch agreed to repurchase $10 billion in failed securities.

Merrill Lynch was advised by Skadden, Arps, Slate, Meagher & Flom, which has represented the bank in the past, and Bingham McCutchen, as reported today by The Am Law Litigation Daily.

UBS is unlikely to be the last financial institution to repurchase securities in response to the credit crisis. The SEC and state regulators are currently investigating auction-rate security sales of over 30 firms, according to The New York Times.

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