UBS Bank USA, the Utah affiliate of UBS AG (UBS), will no longer be granting or offering loans collateralized by Puerto Rico securities. According to the media outlet El Nuevo Dia, UBS Bank USA has agreed to sell approximately $562 million in loans made to Puerto Rican investors to another UBS AG affiliate, UBS Financial Services of Puerto Rico (UBS PR). Additionally, UBS Bank USA has agreed to no longer offer loans to Puerto Rican residents.
As reported, UBS Bank USA signed an agreement with the Office of the Commissioner of Financial Institutions after an investigation was opened concerning the ability of UBS Bank USA to have issued such loans. Per the agreement, the loans transfer was to be completed by around December 20, while the new lending ban in Puerto Rico would go into effect after that date.
Thousands of investors have lost some if not all of their assets in the wake of the drop in value of Puerto Rico bonds and closed-end bond funds that invested in Puerto Rico bonds. This spurred UBS to liquidate millions of dollars from investors because the values guaranteed borrowings with UBS Bank USA. (UBS Bank USA had previously told El Nuevo Dia that it did not have to be licensed in Puerto Rico to lend there.)
According to investor complaints, UBS PR brokers recommended that customers borrow funds to invest even more money into UBS proprietary funds that were largely composed of Puerto Rican bonds. Because of this, investors’ risks went up and when the value of a lot of funds dropped in value, catastrophic losses resulted for many of them.
Even now, Puerto Rico’s economy continues to grow worse and its bonds are still declining. According to credit rater Moody’s, the Commonwealth’s failure to access public debt markets, its expected continuing financial under-performance, and its government’s inability to reform the Teachers’ Retirement System are just some reasons why investors should be on the look out for another ratings downgrade.
In the US mainland and in Puerto Rico, our Puerto Rico muni bond fraud lawyers continue to investigate claims by investors that bought municipal bonds from UBS and from other brokerage firms, including Banco Santander (SAN.MC) and Banco Popular. We are working with our clients to recoup their losses. Please contact us if you think you might have grounds for a securities claim over your Puerto Rico bond funds as well.
Freno a al otorgamiento de préstamos en UBS Bank, EDIC, December 23, 2013
More Blog Posts:
Moody’s Reassessment of Puerto Rico Bonds Does Nothing to Relieve Investor Worries, Stockbroker Fraud Blog, December 14, 2013
Puerto Rico Reportedly Among Those that Engaged in “Scoop & Toss” Tactic with Municipal Bonds, Stockbroker Fraud Blog, December 7, 2013
Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013