UBS Financial Puerto Rico’s Chairman Told Brokers to Sell More Bond Funds in 2011

Reuters is reporting that in 2011, before the prices of UBS Financial Services Inc. of Puerto Rico’s (UBS) proprietary bond funds dropped, the firm’s chairman, Miguel Ferrer, told brokers to either start selling more UBS Puerto Rico bond funds or find a new job. He spoke after the brokerage firm’s representatives began to express reservations about selling the bond funds to their customers because of, among other issues, the high risks that were involved.

According to Reuters, sources in the know said that when UBS asked their brokers about their reluctance to sell the funds, they gave Mr. Ferrer and UBS nearly two dozen reasons, including concerns with low liquidity, excessive leverage, instability, oversupply, and because of the concentration of Puerto Rican government debt, which UBS had underwritten.

UBS has come under fire not just for pushing its own funds to clients for whom they were not appropriate, but also for improperly directing some of them to borrow money from another UBS unit to purchase more fund shares. The Federal Bureau of Investigation, along with the Securities and Exchange Commission, are reportedly looking into the allegations.

Since the fall of 2013, a number of the funds have lost half to almost two-thirds of their value. Hundreds of investors have come forward to file Puerto Rico municipal bond fraud claims against UBS Puerto Rico, seeking to get their money back.

Ferrer’s comments pushing the funds was recorded and you can hear some of what he said by clicking on the link from Reuters below. The audio of Ferrer speaking could benefit investors with securities arbitration claims. Those investors are reportedly already seeking over $900M in damages.

When asked to confirm the recording’s authenticity, UBS would not. Ferrer, however, said he would provide a translation through his attorneys (seemingly confirming it is him on the tapes) and that he reminded the financial advisers during and after the meeting that it was their responsibility to recommend only the financial instruments that were suitable for each customer.

Claimants say that UBS Puerto Rico marketed the Puerto Rico bond funds as providing tax benefits and garnering high yields but failed to notify investors about the significant risks. Investors are also accusing the firm of placing its financial interests first by guiding customers to funds with UBS-underwritten bonds. Many of these investors were retirees.

Meantime, the firm maintains that it thought the funds were solid investments that would benefit investors. However, that has not proven to be the case for many. For example, Mabel Ladicani, 88, and her daughter are among the claimants. The two of them said that without their request, UBS moved their money into debt funds that were higher risk than where they were previously invested. Shortly after the move, these risky investments financially devastated Mrs. Ladicani and her daughter.

In Puerto Rico and the United States, the law firm of Shepherd, Smith, Edwards & Kantas is representing investors in Puerto Rico bond and bond fund cases with claims against UBS Puerto Rico and other financial firms that inappropriately sold the products to customers. Contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation.



Recording shows how UBS drove reluctant brokers to sell high-risk Puerto Rico funds, Reuters, February 6, 2015

An Audio of Ferrer’s Recording, mp4/Reuters

More Blog Posts:
Beneficiaries of Puerto Rico Trust File Securities Fraud Lawsuit Seeking Over $4.5M From UBS Financial Services, Stockbroker Fraud Blog, January 5, 2015

UBS Settles SEC Dark Pool Case for $14M, Stockbroker Fraud Blog, January 16, 2015
UBS Under Scrutiny in New Tax Evasion Probe, Institutional Investor Securities Blog, February 4, 2015