Swiss Regulator Broke Law on UBS Client Disclosure

The Swiss Financial Market Supervisory Authority, known as Finma, exceeded its authority when it told the bank Feb. 18 to deliver the information to the U.S., the Federal Administrative Court in Bern ruled today. The case is separate from a larger agreement to turn over data on as many as 4,450 UBS accounts.

Finma ordered UBS to hand over information on the 255 clients so the bank could avoid criminal prosecution in the U.S., which may have led to the bank’s insolvency, according to the regulator. The Justice Department accused UBS of conspiring to defraud the U.S. by helping Americans hide accounts from the Internal Revenue Service.

“Even if Finma was in a difficult situation because of the threat of a lawsuit against UBS, it shouldn’t have authorized the data transfer without following the proper administrative procedure,” the court said in a statement attached to the ruling. “An authority like Finma cannot apply state of emergency measures in place of the government.”

The court said there was nothing it could do to retrieve the data that had been given to the U.S. UBS, Switzerland’s biggest bank, was ordered to cover the clients’ legal expenses of 5,000 Swiss francs ($4,835) and pay total compensation to the three appellants of 17,000 francs, as it was a defendant in the case. The ruling can be appealed at Switzerland’s Supreme Court.