A few weeks after a FINRA arbitration panel ordered UBS (UBS) to pay $18 million in a Puerto Rico bond fraud case, the firm has been ordered to pay another customer a large amount in a similar municipal bond claim. In this latest ruling, the Gomez family claimed they lost $22.87 million from investing in Puerto Rico securities. UBS Puerto Rico (UBS-PR) brokers had purportedly suggested the Gomez family invest in Puerto Rico bonds despite the fact that they wanted investments that were safe. The family relied on the funds from their investments to cover their living expenses.
UBS argued that Mr. Gomez was an experienced investor. The firm claimed that when Gomez opted to concentrate his portfolio in Puerto Rico bonds, he knew what he was doing.
The FINRA panel disagreed with UBS’s assessment, awarding the Gomez family almost $20 million in cash and refusing to enforce almost $6 million is loans the Gomez family owed to UBS. The securities arbitration award to the Gomezes includes $4 million in punitive damages.
Thousands of investors have accused UBS brokers of knowing about the risks involved in Puerto Rico bonds and Puerto Rico closed-end bond funds but choosing to expose customers to losses regardless in order to make money for the firm. Some UBS brokers even purportedly recommended that their clients get loans so that they could invest more money in the Puerto Rico investments.
In the $18 million Puerto Rico closed-end bond fraud case that was issued last month, UBS is now seeking to have that award overturned. UBS claims that two of the three arbitrators on the FINRA panel were unable to be impartial when ruling in the case. UBS is arguing that the arbitrators did not disclose key material facts before the case began–facts that could have impacted who the firm chose to serve on the arbitration panel. Such challenges to arbitration awards are rarely granted.
Meantime, another investor has stepped forward to file yet another FINRA arbitration case against UBS over losses sustained from investing in Puerto Rico government bonds and UBS’s proprietary closed-end bond funds. The claimant is seeking $8.5 million in his complaint. UBS purportedly bought and held government bonds and Puerto Rico closed-end bond funds on behalf of the claimant, who was under the impression that the securities were low-risk investments. However, because the investor accounts were heavily concentrated in Puerto Rico investments, the risks were not only much higher than what he could handle but also they clearly conflicted with his investment goals, which included capital preservation.
The claimant contends UBS did not disclose the risks that could arise from over-concentrating accounts in Puerto Rico government bonds and UBS Puerto Rico closed-end bond funds. He maintains that had he known how risky the recommended allocations were—if only the firm had properly disclosed them—then he would not have chosen to invest in the securities.
Puerto Rico Bond Fraud
Already, thousands of investors have filed FINRA arbitration claims seeking to recover their losses sustained from investing in Puerto Rico bonds and Puerto Rico closed-end bond funds. Quite a number of these securities arbitration claims have been brought against UBS Financial Services of Puerto Rico (UBS-PR) and its brokers. The firm has already paid millions of dollars to settle with investors, some of whom sustained devastating losses. Many more cases against UBS remain pending. In addition to the settlements, UBS has arbitrated a few claims in FINRA, with the majority of those decisions going in favor of investors.
Other firms that have been subject to FINRA securities cases over the Puerto Rico bond fraud losses include Banco Santander (SAN), Merrill Lynch, Banco Popular, Morgan Stanley (MS), Oriental Financial Services, and others.
If you would like a free, no obligation consultation with an experienced Puerto Rico bond fraud law firm, contact Shepherd Smith Edwards and Kantas, LTD LLP today.
UBS Hit With Second $18M Ruling Over Puerto Rican Munis, Think Advisor, January 12, 2017
UBS Hit With $18.5 Million in Damages, Legal Fees, in Puerto Rico Bond Case, The Street, December 5, 2016