Even after more than three years since the Puerto Rico bonds and closed-end bond funds originally dropped in their initial value, many investors are still waiting to recoup losses they sustained from investing in these securities. Meantime, the U.S. territory continues to deal with its financial woes as it struggles to pay back its $70 billion of debt. At Shepherd Smith Edwards and Kantas, our Puerto Rico municipal bond fraud attorneys have worked hard this year in helping our clients, who are among the thousands of investors from the Commonwealth that suffered significant losses when the island’s securities plunged in value in 2013, in trying to recoup their money.
Below is a recap of some of the significant claims recovered for Puerto Rico investors this year that made the headlines:
A Financial Industry Regulatory Authority (FINRA) Arbitration panel ordered Morgan Stanley (MS) to pay a New Jersey widow over $95,000. Morrisa Schiffman accused the broker-dealer of making unsuitable recommendations to her, as well as of inadequate supervision and disclosure failures. Her FINRA Panel ultimately agreed.
Merrill Lynch was ordered to pay $780,000 in restitution to customers who invested in Puerto Rico closed-end bond funds and municipal bonds. FINRA found that the brokerage firm did not have the proper procedures and supervisory systems in place to ensure that all of the transactions were suitable for a number of these investors. Customers affected, in particular, are those with holdings that were heavily concentrated in Puerto Rico municipal bonds, as well as with holdings were highly leveraged via loan managed accounts or margin. FINRA said that from 1/2010 through 7/2013, 25 leveraged customers who had moderate or conservative investment objectives and modest net worths saw the securities they’d invested in sustain aggregate losses of nearly $1.2M. The customers had at least 75% of their assets in Puerto Rico securities that were ultimately liquidated to meet margin calls.
The firm that has had to pay the most over Puerto Rico bond and fund losses this year, however, is UBS Group (UBS). In February, UBS was ordered to pay an investor $1.45 million for her investment losses. Christel Marie Bengoa Lopez had invested $5 million.
Soon after, a FINRA panel ordered UBS to pay three investors $470,000 for losses they claim were a result of overconcentration in high risk Puerto Rico bonds/bond funds. Obdulio Melendez Ramos, Ramon Velez Garcia, and Carlos L. Merced accused the brokerage firm of fraud and negligent supervision.
In September, FINRA announced that UBS Financial Services and UBS Puerto Rico (UBS-PR) would have to pay investors Jenny Robles Adorno, Desarrollos Jarra SE, and Jose A. River $750,000 for their losses from investing in Puerto Rico securities. They too claimed that UBS engaged in fraud, negligence, as well as recklessness.
In November, UBS Financial Services was ordered by FINRA to pay investor Ana Elisa Ciordia-Robles over $750K in compensatory damages. Also that month, FINRA ordered UBS Financial Services to pay Luis Vega and his ex-wife Teresa Rojas $750,000 for their investment losses involving Puerto Rico bonds and close-end funds, including the UBS Puerto Rico Fixed Income Fund III.
In the largest arbitration award of the year over Puerto Rico securities, a FINRA panel recently announced that UBS Financial has to pay two investors $18.6 million over their investment loses from Puerto Rico closed-end bond funds. Mercedes Imbert De Jesus and Rafael Vizcarrondo accused the firm of making unsuitable investments on their behalf and not properly supervising the broker who represented them.
Investors are not the only ones that have pursued broker-dealers over Puerto Rico bonds in 2016. Ex-UBS employees sued the firm for $25 million claiming that management made misleading statements to them, too, regarding close-end mutual funds. They are accusing the firm of pressuring brokers, even threatening those brokers, into selling Puerto Rico securities to investors despite the high risks to their clients.
Our Puerto Rico bond fraud lawyers represent investors on the island and on the US mainland. Contact us today.