BOSTON, Jan. 2 (UPI) -- Massachusetts officials are investigating allegations that Swiss banking giant UBS improperly charged soft dollars to hedge-fund customers.
UBS did not comment on the report in Tuesday editions of The New York Times report.
One way UBS may be charging soft dollars is by charging higher-than-normal trading fees to compensate for "hedge-fund hotel" office space and failing to disclose the expense to investors, the newspaper said.
UBS leases space to ambitious young hedge fund traders as a temporary home, offering receptionists, espresso machines and consultants to help manage their information systems, the Times said.
It is possible UBS and other investment banks are charging customers for such expenses but hiding them, Massachusetts Secretary of State William Galvin said.
"It's a conflict of interest issue," Galvin, who has subpoenaed UBS and is examining other banks with hedge-fund hotels in Boston to determine how they are charging for their services, told the Times.
Soft dollars are payments investors pay for brokerage services through commissions generated from trades. An investor might get a "complimentary" subscription to a market letter. But the payment is hidden in large commissions paid to the brokerage firm.
