Indiana Secretary of State Announces Major Fines Related to Ongoing ISTA Litigation

UBS will pay in excess of $600,000 to Indiana securities division for violations related to the Indiana State Teachers Association’s financial troubles

INDIANAPOLIS (June 9, 2011) – Indiana Secretary of State Charlie White today announced that Securities Commissioner, Chris Naylor, has signed and approved an agreement in which UBS Financial Services Inc. (UBS) shall submit to a fine of $450,000 and pay $227,000 in investigative costs to the securities division in order to settle the Commissioner’s claims that UBS sold unsuitable investments to the Indiana State Teachers Association (ISTA) Insurance Trust. By entering into a consent decree, UBS neither admits nor denies the Commissioner’s allegations.

This resolution with the Securities Commissioner follows a settlement ISTA reached directly with UBS, resolving claims brought by ISTA against UBS in the Marion County Superior Court. ISTA claimed in that lawsuit that UBS representatives had placed ISTA in unsuitable investments that resulted in massive losses in the ISTA Insurance Trust’s investment portfolio. Claims by ISTA against other entities are still pending.

“We’re glad to see a resolution to this part of an ongoing investigation into other violations related to the troubles surrounding ISTA,” White said. “We will continue to peel away each layer of this case until we have done all we can to account for the losses incurred.”

In addition to its investigation and enforcement proceedings involving the Insurance Trust, the Securities Division continues its pursuit of securities fraud claims against ISTA and the National Education Association (NEA) in a lawsuit pending in the United States District Court in Indianapolis. That lawsuit alleges that more than 20 Indiana school districts lost as much as $23 million because of misrepresentations made by ISTA representatives to schools and teachers regarding an investment component of medical programs sold by ISTA.

The ISTA Insurance Trust’s current trustees have adopted a resolution that any settlement funds earmarked for ISTA relief will be held pending the outcome of what they refer to as the Naylor litigation in the Marion Superior Court, as well as the actions taken by the securities division.  ISTA and the Securities Commissioner have also agreed that ISTA relief funds shall be held by the ISTA Trust and not used for ISTA general purposes for a period of 60 days, while the parties work to properly designate the distribution of the relief funds. In the event a more formal method of securing these funds for a longer term can not be reached by agreement, the Division expects to seek the court’s assistance to secure the funds pending the outcome of the federal court matter.

Link to ISTA on our website:

Click here to view the UBS financial services consent agreement.


Media Contact:
AJ Feeney-Ruiz
Deputy Chief of Staff
Communications Director
Office of Indiana Secretary of State Charles White
Office: 317-233-8655
Cell: 317-730-4778