Two UBS-affiliated firms will pay $17.5 million to settle charges that they failed to disclose a change in investment strategy that cost clients nearly $5 million in estimated losses.

UBS Willow Management and UBS Fund Advisor agreed to settle the charges in an administrative proceeding initiated by the Securities and Exchange Commission, regulators announced on Monday. Approximately $13 million of the settlement will be returned to harmed investors.

According to the SEC, UBS Willow Management marketed the UBS Willow Fund as one primarily invested in distressed debt. From 2000 to 2008, Willow Management invested fund assets using a strategy consistent with the fund’s marketing materials.

In 2008, the firm changed strategies. Instead of investing in debt issued by troubled companies, it began purchasing large quantities of credit default swaps, moving from a strategy focused on debt increasing in value to one focusing on debt decreasing in value.

Over the next year, the UBS Willow Fund’s holding of credit default swaps increased from less than 2.6 percent to more than 25 percent. As a result, the fund started incurring large losses and continued to perform poorly until it was liquidated in 2012.

During that time, UBS Willow Management allegedly failed to provide adequate disclosure of the change in investment strategy to the fund’s investors or board of directors. Marketing materials published from 2008 to May 2009 misstated the fund’s strategy and the investor letters it sent from fall 2008 to August 2011 contained false or misleading information about the fund’s exposure to credit default swaps. Shareholder reports between fall 2008 and 2012 also misrepresented the fund’s strategy.

UBS Fund Advisor, which retained ultimate control over the fund, was allegedly aware of the change in strategy and failed to supervise UBS Willow Management by allowing the change to occur without adequate disclosure to the fund’s investors or board.

Without admitting or denying the charges, UBS Fund Advisor and UBS Willow Management agreed to be censured and to pay $8.2 million in disgorgement, $3 million in civil penalties, $4.9 million to compensate investor losses and $1.4 million in pre-judgment interest.

In another settlement last week, UBS AG agreed to pay $19.5 million to settle charges that it made misleading or false statements in its marketing materials for structured notes tied to the V10 Currency Index.