Pursuant to a recent arbitration ruling, UBS Group AG (UBS) must pay $1.45 million to Christel Marie Bengoa Lopez for losses she sustained in Puerto Rico closed-end bond funds. According to her arbitration claim, filed with the Financial Industry Regulatory Authority (“FINRA”), Bengoa Lopez invested a $5 million gift from her father after he sold his business.
Her broker at UBS purportedly touted the Puerto Rico closed-end bond funds as conservative, safe investments. She claims that he recommended that she use a credit line issued by UBS that would utilize her investments as collateral to purchase an apartment. However, when the closed-end bond funds became worth less than the balance of the loan, the brokerage firm insisted that it be paid back in full.
Commenting on the arbitrator’s ruling, UBS noted that it disagreed with the case outcome.
Unfortunately, numerous investors have lost substantial amounts of money from investing in Puerto Rico funds, many of which were sold by UBS. These funds were concentrated in the U.S. territory’s debt. When some funds lost half or more for their value in 2013, investors realized that the Puerto Rico investments were not as safe as represented. In fact, some investors lost everything.
Brokers from UBS, Banco Santander (SAN), Banco Popular, and other brokerage firms on the island are accused of steering investors toward Puerto Rico closed-end bond funds and individual Puerto Rico bonds even though Puerto Rico debt was not the best investment match for investors in terms of the latter’s goals and the degree of risk their portfolios could handle. Since 2013, Puerto Rico has been struggling to pay back $70 billion in debt-held not just by hedge funds and other institutional creditors but also by middle class Puerto Ricans, who hold about 30%, reports CNN, and other average Americans, who hold about 15%.
CNNMoney, which met with different Puerto Rican bondholders, including Puerto Ricans Teresa and Julio Garcia, who invested $500,000 of their savings in Puerto Rican bonds. They have since lost more than $200,000. Another investor, 57-year-old Joaquin Garcia de la Noceda, who is a locksmith, said he invested about $200,000 in the bonds and has since seen that go down 60%.
Our firm is currently representing a number of investors similar to Ms. Bengoa Lopez and the Garcias who have lost significant sums in Puerto Rico bonds or closed-end funds. Please contact our Puerto Rico municipal bond fraud lawyers at Shepherd Smith Edwards and Kantas, LTD LLP. Our lawyers work with investors on the island and the U.S. mainland.
UBS must pay $1.45 mln to investor in Puerto Rico bond fund case, Reuters, February 19, 2016
I’ve lost over $200,000 on Puerto Rican bonds, CNNMoney, February 22, 2016