Article source: marketwatch.com
WASHINGTON (MarketWatch) — The Justice Department is expanding an investigation into bank foreign currency practices, according to a published report.
The Financial Times. reported, citing unnamed sources, that the Justice Department is looking into whether Barclays UBS, -0.17% and UBS BCS, -0.45% were selling structured products while at the same time not disclosing profits from currency trades that generated the products’ returns. These products were aimed at so-called sophisticated investors, including Swiss hedge funds.
In November, UBS paid U.S., U.K. and Swiss authorities $799 million along with five other banks to settle allegations they did not have proper controls to prevent traders from trying to rig forex dealing. But the Justice Department was not involved in the settlement and is still investigating Barclays.
According to the report, the UBS and Barclays products under investigations are based on the carry trade, where an investor sells in a low-yielding currency and buys in a higher one.
A strategy by UBS offered a facility for investors to switch their position if markets became volatile, and the Justice Department is examining whether UBS profited from switching positions and if the profits were disclosed to clients.
Barclays had a similar product called the optimized currency carry strategy, the report said.