Articles Posted in Financial Firms

In an effort to fight a $20 million coverage lawsuit brought by insurance carriers over Puerto Rico bond fraud cases, UBS Financial Services, Inc. (UBS) argued in court that the exclusions at issue cannot be applied to these investors’ claims. The plaintiffs in the case include XL Specialty Insurance Co., Hartford Fire, and Axis.

According to Law360, a Securities and Exchange Commission filing notes that as of last year UBS is contending with $1.9 billion in claims – including civil, arbitration, and regulatory cases – over its Puerto Rico closed-end bond funds, and to date has already paid $740 million to resolve some of those claims. The bank has come under fire for the way it handled $10 billion of these closed-end bond funds, including claims that they pushed the securities onto investors who could not handle the risks involved and, in some cases, encouraged them to borrow funds to buy even more.

The bank wants coverage under new subsidiary policies that the insurers agreed to even though it includes a specific exclusion for claims that involve the closed-end fund debacle in any way. In its opposite brief, submitted to Puerto Rico federal court, UBS argued that the plaintiffs have not made much of an effort to argue how the exclusion could preclude every related claim, of which there are more than 1600. UBS noted in its brief that insurance law in the U.S. territory mandates that an insurance company defend the whole action even if just one claim is potentially covered.
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Two years after the Financial Industry Regulatory Authority (FINRA) barred former UBS Financial Services of Puerto Rico (UBS-PR) broker Jose Ramirez, nicknamed the Whopper, our UBS Puerto Rico fraud attorneys are continuing to provide representation to investors who sustained losses because they took his and other UBS-PR brokers’ advice to borrow from credit lines in order to invest in even more securities. If you are one of these investors and you would like to explore your legal options, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

It was in 2015 that the US Securities and Exchange Commission (SEC) brought charges against Ramirez accusing him of fraud in the offer and sale of $50 million of UBS-PR affiliated, non-exchange traded closed-end mutual funds. The former UBS broker allegedly enriched himself by advising certain customers to use non-purpose credit lines that a firm affiliate, UBS Bank USA, was offering so that they could buy even more shares.

These customers were not, in fact, allowed to use credit lines to buy the securities and Ramirez allegedly knew this. He is accused of getting around restrictions by telling customers to move money to a bank that had no affiliation with UBS and then re-depositing the funds to their UBS Puerto Rico brokerage account in order to buy additional closed-end mutual funds or Puerto Rico bonds. Such a scheme was a violation of numerous rules and regulations and, if misrepresented to the investors as the SEC has alleged, would have been a major legal violation.

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Barclays (BARC) and Morgan Stanley (MS) were underwriters when the island sold $3.5 billion of bonds in 2014. According to Bloomberg, brokerage firm records submitted to the Financial Industry Regulatory Authority (“FINRA”) indicate that the U.S. Securities & Exchange Commission’s (“SEC”) staff is recommending that the SEC file an enforcement case against Barclays bankers James Henn and Luis Alfaro. The two men are under investigation for allegedly violating fair dealing in selling Puerto Rico bonds. They are also under investigation for alleged violations of securities rules and municipal bond rules as they pertain to misrepresentation, deception and fraud related to the securities.

Additionally, Bloomberg reports the SEC’s staff wants to issue a sanction against Morgan Stanley Managing Director Charles Visconsi and his ex-colleague Jorge Irizarry over disclosures that Puerto Rico made in documents that were sent to investors. The staff is interested in whether the broker-dealer adequately examined representations that were made by the island’s government. Visconsi and Irizarry reportedly have not been accused of any intentional misconduct.

In other Puerto Rico bond fraud news, the Puerto Rico Electric Power Authority (“PREPA”) has joined the island in filing bankruptcy protection. PREPA is currently overburdened with $9 billion of debt.

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A Financial Industry Regulatory Authority (“FINRA”) arbitration panel has awarded two investors $793,000 in their Puerto Rico municipal bond fraud case against UBS Financial Services (UBS) and UBS Financial Services of Puerto Rico (UBS-PR). The claimants, Madeleine Carrero (as an in individual and as the trustee of Ulises Barros Carrero and Fideicomiso Ulises Barros), accused UBS of negligence, misrepresentation, breach of fiduciary duty, unauthorized trading, unsuitability, and breach of contract.

This is the latest ruling in which UBS and its Puerto Rico-based brokerage firm have been ordered to pay investors for the losses they suffered from investing in Puerto Rico bonds and closed-end bonds.

On the island and the U.S. mainland, our UBS Puerto Rico bond attorneys are continuing to work with investors seeking to recover their losses from investing in Puerto Rico securities. Many investors lost everything, with some even borrowing funds at the inappropriate recommendation of their advisor so that they could invest even more in the island’s bonds.

If you think that you may have grounds for a Puerto Rico bond fraud claim against UBS Puerto Rico, Santander Securities (SAN), Banco Popular or another brokerage firm, it’s not too late to file your claim. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

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Nearly a year after suing his former financial adviser for allegedly misappropriating $15M from him, Dallas Cowboys running back Darren McFadden is now suing Ameriprise Financial (AMP) over his investment losses. In his Texas securities fraud case, McFadden claims that the firm was negligent in supervising Michael Vick. The broker is not the same person as former NFL football player Michael Vick nor is he related to him.

Ameriprise started investigating Vick in 2010 because of suspect and unauthorized trades identified in McFadden’s account. However, contends the NFL player, he was never told of the probe or their concerns or that Vick was suspended months later.

McFadden claims that Ameriprise had multiple opportunities to stop the misappropriation of his funds yet took no such action. McFadden later followed Vick to another firm where the ex-financial adviser allegedly misappropriated even more money from him.

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The Financial Industry Regulatory Authority is ordering Wells Fargo Securities (WFC) to pay a $3.25M fine for inaccuracies and mistakes in its reporting for over-the-counter trades that took place between January 2008 and March 2017. The self-regulatory organization also has censured the firm.

According to FINRA, in 2008, Wells Fargo (WFC) reviewed its OTC options trading reporting procedures. It went on to set up systems for reporting these types of trades. However, the firm’s reporting system was never fully established.

Wells Fargo Securities did not actually start reporting OTC options trades until after the firm achieved self-clearing status in 2014. Even then, claims the SRO, Wells Fargo either did not report or was inaccurate when reporting quite a number of these trades.

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Former Stifel, Nicolaus Broker is Accused of Variable Annuity Violations
The Financial Industry Regulatory Authority has suspended an ex-Stifel, Nicolaus (SF) broker for four months over variable annuity transactions that he purportedly inappropriately recommended to certain investors. At the time of the alleged variable annuity fraud, James Keith Cox worked with Sterne, Agee & Leach. Stifel Financial later acquired that firm.

According to the regulator, Cox recommended a number of VA transactions even though there was no reasonable grounds for thinking they were appropriate for the investors. In addition to the suspension, Cox will disgorge the $25,460 he was paid in commissions.

FINRA Bars California Man From Industry Over $100M in Undisclosed EB-5 Investment Sales
A FINRA hearing panels has barred a California-based registered representative for taking part in private securities transactions involving $100M in EB-5 Investments that he failed to disclose to his employer financial firm. Jim Seol sold the EB-5 investments through his business Western Regional Center Incorporated.

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The office of Massachusetts Secretary of the Commonwealth William Galvin has fined LPL Financial (LPLA) $1M because the firm’s financial advisers allegedly made misrepresentations to consumers. According to the state regulator, the brokerage firm, which is based in Boston, failed to properly supervise its advisers located at Digital Federal Credit Union (DCU) branches.

LPL financial advisers are allowed to work out of the DCU in return for part of the concessions. However, noted Galvin’s office, the problem was that LPL’s advisers conducted their business as DCU Financial, a reference that could have cause customers to think that they worked for the credit union.

The Massachusetts regulator said that an undercover sting operation was put into place, during which time one LPL adviser allegedly claimed to work for DCU and said that he was not paid commissions for offering investment advice, which was a false statement. Also, DCU paid these advisers bonuses in a sales contest that LPL never authorized.

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Hours after a May 1 deadline passed, unfreezing any creditor litigation against Puerto Rico, a number of creditors sued the U.S. territory over its outstanding bonds. Plaintiffs of these Puerto Rico bond lawsuits include general obligation bondholders, COFINA bondholders, and bond insurer Ambac.

The May 1 deadline was supposed to have given the island and its federal financial oversight board time to come up with a debt-reduction agreement with creditors as Puerto Rico owes more than $70 Billion of debt. No deals were made by the deadline.

Following the failure of the island to reach any debt reduction deals, Fitch Ratings downgraded $3.5 Billion of PRASA-issued debt from a “CC” rating to a “C.” PRASA is Puerto Rico’s water authority.

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Former UBS Broker is Barred form the Securities Industry

Ronald Broadstone, an ex-UBS (UBS) broker, has agreed to be barred from the securities industry. The Financial Industry Regulatory Authority is the one that brought the ban, accusing him of misusing and misappropriating customer monies, settling a customer case without telling his firm, and taking part in unauthorized trading.

According to the self-regulatory organization, Broadstone’s attorney testified that the former broker would not respond to more questions. His refusal to speak violated FINRA rule 8210.

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