Articles Posted in UBS

UBS Financial Services (UBS) has terminated the employment of Connecticut broker Phil Fiore Jr. The broker-dealer says that even while Fiore was under heightened supervision he did not tell the firm about his outside business activities.

UBS contends that he violated firm policies, such as not disclosing that he was serving as an unpaid director for a not-for-profit entity affiliate, along with a client, as well as not obtaining internal approval to create blog posts, failing to obtain approval to run a charity golf tournament, and not disclosing that a new client had invested in his outside business.

Fiore, who was let go in November, had been a top UBS broker and was rated as a leading adviser in Connecticut. He’d worked at UBS since 2009 and was a senior VP. Previously, he’d been employed with Merrill Lynch.

Continue reading

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.

Continue reading

A Financial Industry Regulatory Authority (FINRA) arbitration panel says that UBS Financial Services (UBS) must pay $18.6 million to customers Rafael Vizcarrondo and Mercedes Imbert De Jesus for their losses from investing in Puerto Rico closed-end bond funds.  The two investors, both UBS clients, accused the broker-dealer of breach of contract, breach of fiduciary duty, and other securities violations. They claim that UBS placed their money in unsuitable investments and did not properly supervise the broker who worked with them. As part of the award, Impert De Jesus and Vizcarrondo will receive $12.7 million in compensatory damages, $2.5 million of interest, $3.2 million in legal fees and $163,000 in expert witness fees.

Vizcarrondo is a prominent lawyer in Puerto Rico. His legal team said that UBS had attempted to portray him as a “sophisticated” investor, someone who should have known what he was getting involved in when he invested in the territory’s bonds.  The firm described Vizcarrondo as having been “fully informed” when he decided to concentrate his investments in UBS’s Puerto Rico closed-end funds. However, as Vizcarrondo’s attorney noted, not all professionals are “sophisticated investors.” Based on its decision, the FINRA arbitration panel obviously agreed with the claimant.

This is the largest FINRA arbitration award issued over Puerto Rico bond funds to date. There are over a thousand cases still pending. These claims were brought by investors seeking to recover the financial losses they suffered from investing in the island’s beleaguered securities. Although a number of firms, including Banco Santander (SAN), Banco Popular, Merrill Lynch and others have been named in Puerto Rico bond and closed-end bond fraud claims, UBS and affiliate UBS Financial Services Inc. of Puerto Rico (UBS-PR) have been the largest target of these claims. In fact, the TheStreet.com reports that on November 2, UBS AG, the parent company of UBS and UBS-PR, notified the U. S. Securities and Exchange Commission in a filing that about $1.9 billion in Puerto Rico municipal bond funds and closed-end fund claims have been brought against it. The firm has already paid out $740 million to claimants.

Continue reading

A Financial Industry Regulatory Authority (“FINRA”) panel is ordering UBS Financial Services, Inc. (“UBS”) to pay Puerto Rico residents over $700,000 in damages.  The FINRA panel ordered UBS to pay $549,000 in compensatory damages to a defunct car rental business belonging to Luis Vega, as well as over $165,000 to Teresa Rosas, who is Vega’s former wife. The firm must also pay over $100,000 in costs and hearing session fees.

Vega and Rosas filed their case against UBS accusing the brokerage firm of securities fraud, negligence, recklessness, and deceit. Vega, 87, invested almost $8 million through his Condado Motors with UBS broker Jose Chaves between ’06 and ’11. During that time, Chaves invested approximately 95% of the money in three of UBS’s Puerto Rico close-end funds, even taking out loans to cover some of the costs. The couple’s lawyer claims that Chavez did not disclose any risks involved other than what was noted in the funds’ prospectus.  Additionally, Rosas bought over 17,000 shares of the UBS Puerto Rico Fixed Income Fund III.

The couple saw their investments lose the bulk of their value when the prices for the Puerto Rico bonds and Puerto Rico closed-end funds dropped in 2013. According to their lawyer, Condado Motors lost $3.9 million in value, as well as $823,650 in net out-of-pocket losses, during 2013. The couple said that their financial problems played a part in their decision to get a divorce.

Continue reading

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered UBS Financial Services (UBS) to pay Ana Elisa Ciordia-Robles almost $1 million, including  $751,000 in compensatory damages and additional sums for legal fees and costs. Ciordia-Robles accused UBS of negligent supervision, breach of fiduciary duty, fraud, negligence, breach of contract, and violations of the Puerto Rico Uniform Securities Act, the Securities and Exchange Commission’s Rule 10b-5, and the Securities Exchange Act’s Sections 10(b). More specifically, Ciordia-Robles claimed she sustained losses from investing in UBS Puerto Rico (UBS-PR) closed-end bond funds.

When Puerto Rico muni bonds dropped in value in 2013, many investors on the island and in the mainland sustained huge investment losses. In the last few years, UBS and UBS-PR       have been the subject of thousands of customer complaints over their sale of Puerto Rico municipal bond and proprietary bond funds. Claimants are alleging that these investments were unsuitable, that high concentrations of these investments were recommended, and that UBS never apprised them of the risks involved in the closed-end bond funds that they were sold. Many of these investors have since realized that their portfolios were never equipped to handle these risks.

It was just last  year that UBS consented to pay about $34 million to US regulators to settle allegations related to its supervision of the sale of the Puerto Rico bond funds and use of leverage against those closed-end funds. UBS has already settled a number civil claims brought by investors through FINRA arbitration.  At Shepherd Smith Edwards and Kantas, LTD LLP our securities lawyers have been working hard to help quite a number of these investors  recoup these losses.

Continue reading

Ex-UBS Broker is Accused of Inflating Customer’s Account 
The Financial Industry Regulatory Authority has barred Jeffrey Hamilton Howell from the broker-dealer industry. The former broker is accused of giving  a customer bogus weekly account statements that overvalued an account by up to $3M. The alleged misconduct is said to have occurred between 9/2008 and 11/2014.
According to FINRA, Howell sent the customer over 300 Stock Tracking Reports that misstated the client’s portfolio in amounts ranging from $289K to approximately $3M. He purportedly used his personal e-mail to send the customer some of the fake reports. This left UBS with records and books that were not accurate.

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.

Continue reading

The Financial Industry Regulatory Authority said that a UBS Group AG (UBS) unit will pay $250K to resolve charges accusing it of not waiving certain fees for mutual fund customers that were eligible for the reduction. FINRA said that the broker-dealer overcharged customers $277,636 to invest in mutual funds. The failure to wave these fees purportedly took place from 9/09 to 6/13.

The self-regulatory organization cited alleged supervisory failures. According to the settlement notice, UBS depended largely on its registered representatives to identify when sales charge waivers were warranted and identifying them. These waivers were linked to the reinstatement rights that let investors get around having to pay front-end sales charges.

Under these rights, individual investors are generally allowed to reinvest money made from selling class A mutual fund shares in the same fund family or the same fund without having to pay fees at the front end. They are given 90-120 days to reinvest for the waiver to be applicable.

Continue reading

The U.S. Supreme Court struck down a Puerto Rico law that would have let its public utilities restructure $20 billion of debt. The territory’s officials enacted the Recovery Act in 2014 in an attempt to help it deal with its $70 billion of debt. Puerto Rico’s large public utilities owe about $26 billion to bondholders and banks. It was their creditors that challenged the law in federal court.

Puerto Rico is not allowed to file for bankruptcy protection. The Commonwealth is excluded from Chapter 9, which is the section of the bankruptcy code that usually applies to local governments, including cities, public utilities, counties, and other branches that have become insolvent and need help. (Puerto Rico has tried to convince the U.S. congress to get rid of the 1984 rule that excluded it from Chapter 9. No reason has been provided for why it was deliberately left out.)

Writing for the majority in the Supreme Court ruling, Justice Clarence Thomas reminded us that the federal bankruptcy code does not let lower government units and states enact their own bankruptcy laws. However, U.S. legislators are looking for ways to potentially help Puerto Rico.

A bill passed by the U.S. House of Representatives to help the territory deal with its debt crisis has gone to the Senate for consideration. If passed into law, the bill would establish a board to manage the restructuring of Puerto Rico’s debt and oversee the territory’s finances. The Commonwealth sure could use the help.

Continue reading

The U.S. House of Representatives passed PROMESA, a bill to help Puerto Rico deal with its recession and its over $70 billion debt, in a landslide vote of 297-to-127. The island has been in financial trouble for some time now, with many of its residents leaving because the situation has gotten so bad. Already, Puerto Rico has defaulted three times in the last year on the debt payments that it owes.

PROMESA would establish an Oversight Board that will regulate the U.S. territory’s finances. The Oversight Board would be able to sell Puerto Rican government assets, let the island reduce the minimum wage for certain workers on a temporary basis, and decide whether to restructure the island’s debt. PROMESA is not a “bailout” of Puerto Rico as no taxpayer money would be used to pay off Puerto Rico’s debt and no federal funds would be committed under the bill.

Congress’s passage of PROMESA comes as the island is encountering new financial problems, including that the Commonwealth owes $2 billion on July 1 of this year. If the U.S. Senate were to pass PROMESA before then, however, Puerto Rico may not have to pay the full amount in July. The bill gives the Commonwealth a grace period through at least February 2017.

Under that “grace period” provision, Puerto Rico would be able to pay just interest on its debts and creditors wouldn’t be allowed to go after the Commonwealth with lawsuits. The grace period would hopefully give the board time to devise a plan.

Even though a solution is clearly needed, there are those who oppose the measure, including some creditors, interest groups, and bondholders. Puerto Rico’s $7 billion debt is held by local residents, financial institutions, U.S. hedge funds, and mutual fund firms, which means that there are investors on the mainland who are also holding Puerto Rico debt.

Continue reading

Contact Information