UBS suspends munis head amid auction-rate probe

NEW YORK, July 28 (Reuters) - UBS (UBSN.VX) has suspended David Shulman, its U.S. fixed income unit head and global head of municipal securities, at a time when the Swiss bank faces state and federal probes into its sales of auction-rate securities, a person familiar with the situation said.

UBS declined to comment, citing its policy on personnel matters.

New York State Attorney General Andrew Cuomo on Thursday sued UBS, accusing it of committing a "multibillion-dollar fraud" by steering clients into auction-rate securities even after there were signs these markets were no longer as safe or liquid as cash.

The lawsuit said at least seven UBS executives dumped $21 million in auction-rates held in personal accounts in December, as auctions began to fail and unwanted securities piled up in the bank's own inventory.

No executives were named in the civil suit.

Auction rates are securities issued by towns, student lenders and mutual funds, with interest rates set through periodic auctions. These securities have been impossible to sell since January, when the credit crunch led to a breakdown of these auctions.

UBS last month shut down its U.S. muni bond business after failing to find a buyer, eliminating more than 200 jobs. AT UBS, like most banks, the auction-rates business was run by the muni bonds division. (Reporting by Joseph A. Giannone, editing by Maureen Bavdek)