SEC Comment Letter for UBS AG (AMUB, BDCX, BDCZ, CEFD, HDLB, IFED, IWDL, IWFL, IWML, MLPB, MLPR, MTUL, MVRL, PFFL, QULL, SCDL) (CIK 0001114446) (AMUB) — Sep 30, 2016
UBS AG (AMUB, BDCX, BDCZ, CEFD, HDLB, IFED, IWDL, IWFL, IWML, MLPB, MLPR, MTUL, MVRL, PFFL, QULL, SCDL) (CIK 0001114446)
Date: Sept. 30, 2016 · CIK: 0001114446 · Accession: 0000000000-16-095322
AI Filing Summary & Sentiment
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Mail Stop 4720 September 29, 2016 Via E-mail Kirt Gardner Chief Financial Officer UBS Group AG 677 Washington Boulevard Stamford, Connecticut 06901 Re: UBS Group AG UBS AG Form s 20-F for Fiscal Year Ended December 31, 2015 Filed March 18, 2016 Form 6 -K dated July 29, 2016 File No s. 1-36764 and 1-15060 Dear Mr. Gardner : We have reviewed your filing s and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to these comments within ten busine ss days by providing the requested information or advis e us as soon as possible when you will respond. If you do not believe our comments apply to your facts and circumstances , please tell us why in your response. After reviewing your response to these comments, we may have additional comments. Form 20 -F Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syrian Human Rights Act, page 12 1. In your letter to us dated September 30, 2013, you described contacts with Syria and Sudan. As you are aware, Syria and Sudan are designated by the U.S. Department of State as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls. Your Form 20 -F does not include information about those countries. Please describe to us the nature and extent of your past, current, and anticipated contacts with Syria and Sudan since your 20 13 letter, whether through subsidiaries, affiliates, customers or other direct or indirect arrangements. You should describe any products, services, or technology you have provided to Syria and Sudan, directly or indirectly, and Kirt Gardner UBS Group AG September 29, 2016 Page 2 any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control. 2. Please discuss the materiality of any contacts with Syria and Sudan you describe in response to the comment above, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any associated revenues, assets, and liabilities for the last three fiscal years and the subsequent inter im period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. As you know, various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. You should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Syria and Sudan. Consolidated Financial Statements of UBS Group AG, page 390 Note 1 Summary of significant ac counting policies , page 409 b) Changes in accounting policies, comparability and other adjustments , page 428 Statement of cash flows – definition of cash and cash equivalents , page 428 3. Please address the following regarding your disclosure that you have changed your definition of cash and cash equivalents to ex clude cash collateral receivables on derivative instruments with bank counterparties. Please describe the drivers for this change in classification. As part of your response, t ell us how you co nsidered paragraph 7 of IAS 7 in determining your treatment of these receivables before and after the change. Tell us the duration terms of the derivative contracts which are collateralized by the cash receivables formerly treated as cash equivalents. Clarify whether all cash collateral receivables from banks for your derivative contracts were formerly included in cash equivalents or only a subset of your cash collateral receivab les meeting certain parameters. Please identify any suc h parameters in y our response. Kirt Gardner UBS Group AG September 29, 2016 Page 3 Form 6 -K filed on July 29, 2016 UBS Group AG Interim Consolidated Financial Statements , page 75 Note 1. Basis of Accounting, page 86 London Clearing House interest rate swaps converted to a settlement model, p age 86 4. We note your disclosure that effective June 30, 2016 you elected to convert your interest rate swaps transacted with the London Clearing House (LCH) from the previous collateral model to a settlement model. Your disclosure goes on to state that the intere st rate swaps are now legally settled on a daily basis resulting in the derecognition of the associated assets and liabilities, and the effect of this change as of June 30, 2016 is a CHF 93 billion reduction in gross cash collateral receivables and payable s on derivative instruments and corresponding netting presented in Note 12. Please address the following: Tell us in more detail the specific terms that changed as a result of the conversion that resulted in the interest rate swaps now being considered l egally settled on a daily basis. As part of your response, please tell us whether the timing or amount of cash flows related to the interest rate swaps has changed. Tell us whether any of the interest rate swaps that were affected by the conversion were included in hedge accounting relationships at the time of conversion. If so, please tell us your consideration of the guidance in paragraphs 91 and 101 of IAS 39. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable Exchange Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, th ey are responsible for the accuracy and adequacy of the disclosures they have made. In responding to our comments, please provide a written statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceedin g initiated by the Commission or any person under the federal securities laws of the United States. Kirt Gardner UBS Group AG September 29, 2016 Page 4 You may contact Michael Henderson, Staff Accountant at (202) 551 -3364 or Kevin W. Vaughn, Branch Chief at (202) 551 -3494 if you have questions regarding comments on the financial statements and related matters. Please contact me at (202) 551 -3419 with any other questions. Sincerely, /s/ Christian N. Windsor Christian N. Windsor Special Counsel Office of Financial Services