UBS is Fined $3.6M, Plus Must Pay $1.7M in Restitution Over Puerto Rico Closed-End Mutual Fund Sales

UBS Financial Services Incorporated of Puerto Rico (UBS) has reached a settlement with the Commonwealth’s Office of the Commissioner of Financial Institutions (OCIF) over UBS’s offering and sale of closed-end mutual funds in Puerto Rico. As part of the agreement, UBS will pay a $3.5 million fine, as well as $1.7 million in restitution to 34 clients. As is typical with such settlements, UBS is not denying or admitting to any wrongdoing.

After examining UBS’s operations between the periods of 1/1/06 through 9/30/13, OCFI discovered that UBS had placed clients with conservative risk tolerances in high concentrations of Puerto Rico Closed-End Funds (PRCEF). OCIF further alleged that UBS recommended or allowed these clients to use “non-purpose” loans to buy more PRCEF, which should have never happened. OCFI also reported irregularities in the way some clients’ accounts were managed and said UBS had engaged in inadequate supervision and recordkeeping.

The clients that are entitled to restitution are primarily elderly investors with low net worth and conservative financial profiles. UBS is going to pay them almost $1.7 million in restitution. This offer has to be made within 45 days of the settlement’s execution. The $3.5 million penalty will go to the Securities Trading, Investor Education and Training Fund.

UBS is also required to enhance its supervision of six of its agents, who may have committed practices that were objectionable, for at least six months. UBS has agreed to reassess, and perhaps even modify, its procedures and policies to make sure the firm is complying with regulations. UBS also will review additional customers’ accounts with similar profiles as the ones affected by these claims to see if further action and restitution are required.

UBS Puerto Rico is one of the firms accused of making inappropriate recommendations to investors in Puerto Rico muni bonds. When the bonds started to fail last year, many investors suffered huge losses.

Our Puerto Rico bond fraud lawyers have been meeting with investors on the island and in the U.S. to see how we can help recover their losses. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation about your investment account.

 

 

UBS Settlement with OCIF


More Blog Posts:

UBS Wealth, OppenheimerFunds Take Financial Hit From Puerto Rico Muni Bonds, Stockbroker Fraud Blog, August 15, 2014

Investors Pursue UBS’s Puerto Rico Brokerage Over Closed-End Bond Funds, Stockbroker Fraud Blog, July 23, 2014
Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt
, Institutional Investor Securities Blog, November 15, 2013

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