market selloff headline

market selloff headline

Tuesday, August 17, 2010

FINRA arbitrators order UBS to pay $81 million for ARS sales to paygo cellular marketer

Wed Aug 4, 2010

* UBS to pay Kajeet Inc $80.8 mln in damages

* UBS says will challenge ruling

By Joseph A. Giannone

NEW YORK, Aug 4 (Reuters) - A FINRA arbitration panel ordered UBS AG (UBSN.VX) on Tuesday to pay $81 million in damages to a Bethesda, Maryland-based cellphone marketer that purchased auction-rate securities through the U.S. brokerage.

FINRA documents posted online showed a panel comprised of three public arbitrators ordered to pay the damages to Kajeet Inc, which purchased student-loan auction-rate securities that lost value during the credit crisis.

Kajeet, which sells pay-as-you-go cell phones aimed at children, had claimed $110 million in losses.

"We strongly disagree with the arbitration panel's decision on a legacy auction-rate matter and we will file a motion to overturn that decision," UBS spokeswoman Karina Byrne said. "We believe the outcome is unwarranted under both the facts and the law."

Auction-rates securities were long touted as cash-like investments, but became impossible to trade after credit markets seized up in 2007.

State and federal regulators have forced UBS to repurchase $22.7 billion of auction rates from individual investors. The Securities and Exchange Commission continues to investigate the role of individual executives at the firm.

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