The latest news out of UBS involves former Merrill executive, Bob McCann, who’s dealing with a non-compete clause that’s keeping him from supposedly joining the firm.

McCann is in talks to settle a lawsuit he filed against Bank of America that attempted to void a non-compete clause—which keeps McCann from joining a competitor within certain time period. McCann says the BofA fired him without cause and the non-compete should therefore be void, according to Bloomberg News. There’s still no official word from UBS on regarding the hiring of McCann. If he is hired, he might replace Marten Hoekstra, head of UBS’s wealth management business in the Americas. (One UBS employee we know said, “Latest rumor says UBS can't afford him.”)

The talk of replacing Hoekstra comes as UBS attempts to contain damage to its reputation done by the tax evasion dispute with the U.S. government and rumors of a sale of the U.S. wealth management business continue. (Although a UBS spokesperson says the company’s CEO, Oswald J. Grübel, has reiterated at board meetings that the U.S. Wealth Management business will not be sold.) Further, UBS lost 800 advisors in the second quarter and suffered a net outflow of client assets of more than $5 billion. “Unless UBS manages to repair its reputation quickly, it will see a gradual but continuing loss of market share – particularly to regional brokerage rivals and the independent broker/dealer and advisor space,” says a senior analyst at the Aite Group.

One top UBS advisor with over $1 billion in client assets says the problem is that the Zurich-based bank is not investing money in its U.S. wealth management operation. “Everything is being cut. Budgets have never been this tight in my 25 years here. BOMs are becoming complex managers, and they have no authority on the local budgets anymore. All the travel and expense requests are going through the central office. Every expense that used to be no problem is being scrutinized and turned down. They cut a quarter of the internal back office,” he says.

In its second-quarter earnings release, UBS said it’s on track to achieve the targeted fixed cost base reduction of CHF 3.5 to 4.0 billion by 2010, and that personnel was down by 4,400 to 71,806 on June 30. In April, the firm said total staff would be reduced to 67,500 by 2010.

As far as McCann replacing Hoekstra, the advisor says there’s nothing any significant any new executive can do to make a difference under current conditions. “If you bring in someone new, you have got to be able to give him money to run things properly.”

Another UBS advisor with about $800 million in AUM says none of the rumors seem to make sense. “Why would they hire McCann if they were planning to sell the firm? Heck, why would McCann want to work here if they were planning to sell us? Nothing is clear right now. We don’t know what’s going to happen,” he says.