FINRA Orders UBS to Pay Shepherd, Smith, Edwards & Kantas Client $9 Million Over Puerto Rico Municipal Bond and Fund Investment Losses

Shepherd Smith Edwards and Kantas, LLP (“SSEK”) is pleased to announce that a Financial Industry Regulatory Authority (“FINRA”) arbitration panel has awarded an SSEK client a net of almost $9 million for his losses in Puerto Rico bonds and Puerto Rico Bond Funds. SSEK client, Dr. Luiz Romero Lopez, won his securities arbitration claim against UBS Puerto Rico with the FINRA panel awarding him a net of almost $8 million in compensatory damages and an additional $1 million in punitive damages.

According to the FINRA arbitration panel, UBS exhibited “extreme recklessness and indifference” to the consequences of abuses in its “non-purpose” loan program in Puerto Rico. The panel accused UBS of either purposely using a “non-purpose” loan to be “recycled” in a manner that violates Regulation U or doing so with “reckless” indifference to the consequences that could arise from such abusive loans.

The FINRA arbitration panel found that the loan created “additional excessive leverage.” Because of this, when the market dropped in 2013, the Claimant lost more money than if his funds had been more suitably invested with “less leverage.”

Addressing the latest Puerto Rico bond fraud award against UBS – the third multi-million dollar award against it over such bonds in the last 60 days – the broker-dealer said that it disagreed with the decision to award the Romero damages. UBS unsuccessfully tried to make the argument that Dr. Romero was an experienced investor who was fully informed about leveraging investments and investing heavily in Puerto Rico closed-end funds and Puerto Rico bonds. The FINRA panel obviously disagreed.

“Dr. Romero’s case was an important reminder that even customers who are business savvy can be abused,” says SSEK partner Sam Edwards, one of the members of Dr. Romero’s trial team. “This case is further evidence that UBS in Puerto Rico had a business plan that resulted in clients, like Dr. Romero, being wrongfully concentrated in Puerto Rico debt with lots of leverage.”

According to SSEK partner Kirk Smith, another member of Dr. Romero’s trial team, “In such a situation, a client can be almost completely wiped out in a very short period, a risk that would be impossible for all but the most sophisticated investor to understand. However, UBS was well-aware of the risks and chose to use its knowledge to protect itself, instead of its client.”

For nearly four years, our Puerto Rico muni bond fraud attorneys have been working with investors in trying to recoup their losses. We represent investors on the island of Puerto Rico and the US mainland. If you think you may have a securities fraud claim against UBS, Popular Securities, Santander Securities, Merrill Lynch, Morgan Stanley (MS) or another broker-dealer, contact Shepherd Smith Edwards and Kantas, LTD LLP today.

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