
The regulator ordered the bank to pay compensation, saying the �??poor execution of its due-diligence obligations constitute a serious failure of its surveillance role as a depositary bank.�?� CSSF gave the UBS's local arm three months to pay compensation for its failures and improve procedures and structures.
UBS rejected the claims, saying it was �??unfair�?� to blame the bank. An official said: �??The investors in Luxalpha were sophisticated and explicitly agreed that the safekeeping of the securities was Madoff�??s responsibility and not UBS's.�?�
UBS said that the Luxalpha fund was set up in 2004 at the request of a group of investors who already had money with Mr Madoff and wanted to hold their investments through a Luxembourg fund. Investors in the fund were required to sign a subscription form that said �??the risk of loss of the assets following a default of the US registered broker-dealer is borne entirely by the shareholders.�?�
Luxembourg is currently trying to rebuff critics who say that lax regulation is at least partially to blame for the losses.