Order for UBS to release client data judged unlawful

The court said it was now up to clients to decide what further action they take.

"The Federal Administrative Court has made a decision about the complaint. Lawyers now have to examine it and decide whether their clients derive claims from it," a court spokesman said.

Regulator FINMA decided to allow UBS (UBSN.CH)to hand over some client data to U.S. tax officials on February 18, weakening the country's strict bank secrecy rules in an effort to end a damaging probe into its biggest bank, which prompted clients to pull billions of francs from accounts and leave in droves.

"Even though FINMA was in a difficult position because of the threat of charges against UBS AG, it should not have ordered unilaterally the passing on of data outside of a proper process of a request for official assistance," Switzerland's Federal Administrative Court said.

UBS declined to comment, while FINMA said it would look closely at the decision and decide whether to appeal. Court documents showed an appeal could be lodged within 30 days.

UBS shares extended earlier gains after the ruling was published, trading 3.8 percent higher at 17.21 Swiss francs by 1127 GMT (6:27 a.m. EST) and outperforming a 1.5 percent rise in the DJ European banking sector index.<.SX7P>

BANKING SECRECY

In February UBS agreed to pay a $780 million fine and disclose the identity of some clients after U.S. investigators accused it of helping wealthy Americans to dodge taxes.

At the time, Finance Minister Hans-Rudolf Merz defended the move, saying UBS had no choice but to settle the case to avoid criminal charges that could have threatened its existence and undermined Switzerland's economy.

FINMA's decision was a prelude to the Swiss government bowing to international pressure to soften its cherished bank secrecy laws in March, removing a competitive advantage for the alpine country's banks.

On Friday, the court said overtures by the Swiss cabinet and parliament for FINMA to do everything in its power to prevent a possible prosecution of UBS by U.S. authorities had fallen short of telling FINMA to have UBS hand over client accounts.

The regulator had incorrectly based its decision to allow UBS to hand over the data on Articles 25 and 26 of Switzerland's banking law, which permit bank secrecy to be lifted in special cases to prevent the threat of insolvency to a bank, the court said.

"(The regulations) do not, however, allow the direct handing over of bank account data either according to the wording or the systematics," it judged.

In August, the Swiss government struck a deal to hand over details of 4,450 UBS bank accounts to end the long-running investigation into the bank.

Many other Swiss banks closed their doors to new U.S. clients altogether as the UBS case dragged on. Some told existing clients to find a new bank, while others significantly raised disclosure requirements for U.S. clients.

(Reporting by Jason Rhodes, editing by Will Waterman, John Stonestreet)

WhatsAppFacebookTwitterLinkedinBeloudBluesky