UBS AG confirmed that it has reached a settlement agreement with the New York attorney general regarding its fee-based brokerage program, known as InsightOne.

However, it expressed disappointment with the AG’s press statement announcing the settlement, which it says mischaracterizes the program and its operation.

NY’s AG Andrew Cuomo announced that UBS Financial Services, Inc. agreed to pay US$23.3 million in, what he calls, the largest ever settlement in the history of fee-based brokerage accounts. Under the terms of the settlement, UBS will reimburse customers US$21.3 million and pay a US$2 million penalty for inappropriately steering customers into the fee-based accounts of its InsightOne brokerage program.

“UBS convinced customers to rely on its advice and then abused that trust,” said Cuomo. “This major settlement is a win for customers inappropriately pushed into unsuitable brokerage accounts and a warning to the entire industry that customers’ interests must come first.”

His statement added that the settlement was reached after the AG’s investigation led to a lawsuit that asserted UBS placed thousands of traditional brokerage customers to InsightOne accounts, falsely promising comprehensive and sophisticated financial planning services. Additionally, the complaint alleged UBS was fully aware that InsightOne would be inappropriate and more costly for traditional brokerage customers who made few trades per year. The company had a legal obligation to keep these customers out of the program. Instead, UBS financially incentivized brokers to switch customers into accounts regardless of whether the accounts fit their needs, and then charged customers millions of dollars in unnecessary fees, it claimed.

UBS countered that it settled this case to avoid protracted litigation. “InsightOne was developed to benefit clients, not as a scheme to disadvantage them,” it said. “Despite what the NYAG’s press statement alleges, UBS did not “inappropriately steer” customers into unsuitable accounts or “switch customers into accounts regardless of whether the accounts fit their needs” or abuse the trust of clients.”

The firm added that fee-based brokerage accounts provide clients with a choice of pricing methodologies, and said that the vast majority of clients who chose InsightOne during the relevant period realized cost savings over the life of their accounts.

“UBS agreed to pay US$21.3 million to approximately 3,000 current and former InsightOne clients who, after extensive review, would have been better served in a commission-based account,” it allowed. “That number comprises less than 3% of the more than 100,000 accounts that were active in InsightOne during the relevant period. UBS believes this is appropriate and equitable under the circumstances. UBS also agreed to pay a US$2 million penalty.”