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U.S. Securities and Exchange Commission

SEC Charges Former UBS Financial Adviser With Defrauding Life Settlement Fund Investors


Washington, D.C., March 3, 2011 – The Securities and Exchange Commission today charged a former financial adviser at UBS Financial Services LLC with misappropriating $3.3 million in a scheme that included bilking investors in a private investment fund he established.

The SEC alleges that Steven T. Kobayashi, who worked in UBS’s Walnut Creek, Calif., office, created a pooled investment fund to invest in life insurance policies. But he wound up stealing much of the money to support his extravagant lifestyle. Kobayashi concealed his fraud by liquidating his customers’ securities and funneling the money back to the fund and its investors.

In a parallel action, the U.S. Attorney’s Office for the Northern District of California today filed criminal charges against Kobayashi arising from some of the same alleged misconduct.

“Investors count on their brokers to safeguard their investments,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “It’s difficult to imagine a more flagrant abuse of that trust than the manner in which Kobayashi pocketed his customers’ money and used it to feed his own habits.”

According to the SEC complaint filed today in federal district court in Oakland, Kobayashi established Life Settlement Partners LLC (LSP), a fund that invested in life settlement policies. He raised several million dollars from his UBS customers for the fund. Beginning in early 2006, Kobayashi used LSP’s bank accounts as his personal piggy bank, spending at least $1.4 million in investor funds on expensive cars, prostitutes, and large gambling debts.

The SEC alleges that in an attempt to repay LSP and its investors before they discovered his theft, Kobayashi induced several of his other UBS customers to liquidate securities in their UBS accounts and transfer the proceeds of those sales to entities that he controlled. In this manner, he stole an additional $1.9 million from these investors.

Kobayashi, who lives in Livermore, Calif., agreed to settle the SEC’s charges against him without admitting or denying the allegations. He agreed to a permanent injunction from further violations of the antifraud and other provisions of the federal securities laws, and consented to the institution of public administrative proceedings against him in which he will be permanently barred from associating with entities in the securities industry. The amount of ill-gotten gains and monetary penalties that Kobayashi will be required to pay will be determined by the court at a later date.

The SEC’s investigation was conducted by staff attorney Susan Fleischmann and Assistant Regional Director Jina Choi of the San Francisco Regional Office. They were assisted by Brad Darfler and Carla Carriveau of the broker-dealer examination team.

The SEC acknowledges the assistance of the U.S. Attorney's Office for the Northern District of California, the Federal Bureau of Investigation, and the Internal Revenue Service.

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For more information about this enforcement action, contact:

Michael S. Dicke
Associate Regional Director, San Francisco Regional Office
(415) 705-2458



Modified: 03/03/2011