Luxembourg’s financial regulator fines UBS €250,000 over Greensill breaches

UBS has been fined €250,000 by Luxembourg’s financial regulator for a series of compliance breaches related to Credit Suisse’s handling of investments in Greensill funds.

The Commission de Surveillance du Secteur Financier (CSSF) handed the bank the fine, the maximum amount possible under rules governing investment fund managers, earlier this month over the breaches committed by Credit Suisse prior to its merger with UBS. The fine was issued on 5 December but details were only published on CSSF’s website on Friday.

Investors had been advised by Credit Suisse to invest in funds tied to specialist finance firm Greensill Capital, and lost tens of millions when Greensill collapsed three years ago.

The CSSF inspection revealed there were “severe and persistent breaches of the applicable legal and regulatory requirements” concerning sub-funds which invested in Greensill.

The fine was handed down for several gaps including breaches of regulations relating to “organisational requirements, oversight of delegates, disclosure to investors, risk and liquidity management systems, conflicts of interests and valuation,” the CSSF said.

These included a failure by Credit Suisse to perform “specific due diligence work on the delegated portfolio manager”, while the bank’s asset management division had “addressed the monitoring of the investment process of the SCF Funds [sub-funds] by limiting itself to raising general questions to the delegated portfolio manager.”

The bank did not comply with rules pertaining to disclosure to investors while conflicts of interest were also found in Credit Suisse’s handling of investments, the financial regulator concluded. In one case, the CSSF said, the bank’s asset management division “entered into a side letter agreement with a client company granting a preferential treatment to that company” which was “only disclosed to investors” in sub-funds “after its signature and termination”.

“Multiple investments made by the delegated portfolio manager on behalf of the SCF Funds [sub-funds], upon proposals of Greensill, were made in a context where there was a potential conflict between the interests of Greensill on the one hand and the interests of the SCF Funds [sub-funds] and their investors on the other hand, thus exposing the SCF Funds [sub-funds] to conflicts of interest with a material risk of damage for the investors,” the CSSF said.

Credit Suisse had also breached regulations regarding the valuation of assets, Luxembourg’s financial regulator found. Valuation policies and procedures “were incomplete as they did not contain specific information on the valuation method used” and also “did not include any controls put in place for the ongoing valuation process during the regular lifespan” of the sub-funds and “did not foresee any ongoing valuation checks at asset level.”

The Luxembourg Times contacted UBS for comment but had not received a response at the time of publication.

Earlier this year investors wrote to the CSSF challenging an offer of redress from UBS, which had offered to pay 90% of the funds tied up in Greensill. A group of former Credit Suisse clients had tried to gain access to fund documents to see if they could receive full compensation for their losses but had been denied access to the documents by the fund management company, which is now part of UBS, the Financial Times reported in July.