The Financial Industry Regulatory Authority announced that UBS Financial Services and its Puerto Rico subsidiary (UBS) must collectively pay three investors $750,000 in damages for losses they sustained from investing in UBS’s proprietary Puerto Rico closed-end bond funds and Puerto Rico bonds. The claimants are Jenny Robles Adorno, Desarrollos Jarra SE, and Jose A. Rivera.
The investors accused UBS of recklessness, fraud, and negligence. They sought compensatory damages, punitive damages, and reimbursement of commissions that they said were unlawful. In San Juan, the FINRA arbitration panel awarded Rivera $562,500, Robles $30,000 and Jarra $157,500. UBS said it was “disappointed” with the panel’s decision to award any damages to the claimants.
This is not the first Puerto Rico bond fraud arbitration case in which UBS has been ordered to pay investors. Just this March, the firm had to pay over $470,000 to three investors who said their accounts were over-concentrated in the same Puerto Rico focused investments. The claimants in that case alleged negligent supervision and fraud. Similarly, UBS was ordered to pay a former television executive over $1,400,000 in the fall of 2015 for over-concentrating the former customer in UBS’s proprietary funds and misrepresenting the risks of those investments.
While other firms in Puerto Rico, including Banco Santander (SAN) and Banco Popular, have also been accused of recommending Puerto Rico municipal bonds and other Puerto Rico-focused products even when they were unsuitable for many investors, UBS has been the largest target in customer complaints, arbitrations, and regulatory inquiries concerning the island. Many claimants allege inappropriateness by the firms’ brokers in their soliciting of Puerto Rico closed-end bond funds and bonds as well as misrepresentation of the risks of concentrating large positions in these volatile investments.
Many of these investors were never equipped to handle the risks that came with investing in Puerto Rico’s debt. Since the value of the Puerto Rico bonds plunged three years ago, thousands have come forward seeking to recoup their losses through FINRA arbitration. Damages claimed against UBS alone are at least $1.5 Billion. More than $284 million of these claims have been settled or resolved in arbitration.
Some UBS Puerto Rico brokers have even stepped forward claiming they were pressured by their superiors to get investors to buy Puerto Rico focused products. Investors contend that UBS brokers encouraged them to borrow funds so they could buy even more Puerto Rico municipal bond funds. Many investors, including retail investors and small business owners, lost everything.
Please contact Shepherd Smith Edwards and Kantas today to speak with one of our Puerto Rico bond fraud attorneys. We represent investors on the mainland and on the island in recovering their losses through FINRA arbitration. Hablamos Español. Your initial case consultation with us is a free, no obligation session.
Finra panel directs UBS to pay $750K for Puerto Rico investment damages, InvestmentNews, September 12, 2016
Finer deals UBS $470K Fine over Puerto Rico Bonds, Financial Advisor, March 29, 2016