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UBS has recently made approximately 100 “goodwill payments” to Swiss customers who suffered losses on foreign exchange derivatives in the aftermath of Donald Trump’s announcement of “liberation day” tariffs. This move comes as the Swiss bank aims to put an end to the incident amidst increased regulatory scrutiny.
Following complaints from clients who faced significant losses due to the sharp decline of the US dollar following Trump’s tariffs announcement on April 2, UBS established an internal task force to investigate the matter. The bank reviewed all clients who had utilized the product and identified that some had taken on excessive risks compared to their assets. As a result, around 100 clients received compensation after the review process.
The foreign exchange product in question is designed for professional and high-risk investors, where clients agree to exchange dollars for Swiss francs at a fixed rate within a defined range. However, when the exchange rate moves beyond this range, clients are obligated to continue trading under unfavorable conditions, leading to substantial losses.
Nicolas Ollivier, a lawyer representing affected clients, highlighted that these products shift the risk from the bank to the client, leaving them with minimal gains and significant exposure to losses. It appears that some clients were not adequately informed of these risks, raising concerns about transparency and client protection.
UBS is currently evaluating the conduct of its client advisers to determine if they should have communicated the risks more clearly to clients. Some clients who have not received compensation have filed criminal complaints in Zurich, alleging violations of the Unfair Competition Act.
The situation underscores the importance of robust risk controls and client protection measures, especially for a major wealth manager like UBS. Clients have reported instances of aggressive selling of the product despite expressing concerns about the risks involved. One client lost over SFr3mn, while another, with a medium risk appetite, experienced significant losses due to inadequate communication from their adviser.
UBS has stated that they have thoroughly reviewed the matter and addressed each client’s case individually. The bank remains committed to resolving any outstanding issues and ensuring transparency in its dealings with clients.
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