The move follows a successful legal action from Massachusetts secretary of state William Galvin, who alleged that investors had been fraudulently sold "low-risk" securities that later lost value.
These clients will now be paid back in full, costing UBS around $70 million.
New York-based investor Harry Newton, speaking to news agency Bloomberg, welcomed the news.
"It's fabulous," he said. "[UBS] were the worst of all the brokerage companies that sold this stuff."
News of the buy-back scheme adds to the many financial setbacks currently faced by the Zurich-based firm.
As well as writing off around $40 billion of assets due to the ongoing credit crunch, UBS has also replaced its chief executive earlier this year.
The US trial of a former UBS banker, Bradley Birkenfeld, has also proved severely embarrassing - with allegations that staff helped wealthy American clients hide around $20 billion from authorities so that they could avoid income tax.