UBS Category Archives — Page 12 of 20 — Investor Lawyers Blog Published By Investment Fraud Attorneys

Deutsche Bank, UBS Are Probed Over Dark Pools & High-Frequency Trading, While An Investor Sue Barclays

Published on: July 30, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank AG (DB) and UBS AG (UBS) have disclosed that they are cooperating with regulators investigating dark pool trading venues and high frequency trading venues. Currently a number of banks are under investigation.

UBS says that among those probing its dark pool operation, which is consider the largest in the U.S. according to trade volume, are the Financial Industry Regulatory Authority, the U.S. Securities and Exchange Commission, and New York Attorney General Eric Schneiderman. The bank says it is one of many defendants named in related class action lawsuits over dark pool trading.

Meantime, Deutsche Bank also says that it too has gotten requests from certain regulators for data about high frequency trading. The bank’s dark pool is known as the SuperX European Broker Crossing System. Deutsche Bank is a defendant in a class action case claiming that high frequency trading may have violated U.S. securities laws.

Investors Pursue UBS’s Puerto Rico Brokerage Over Closed-End Bond Funds

Published on: July 23, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is reporting that roughly 400 claims have already been filed against UBS Financial Services Inc. of Puerto Rico (UBS) and other brokerage firms over the fallout of municipal bonds and bond funds related to the Commonwealth of Puerto Rico. As the U.S. territory’s bonds continue to drop in price, more investors are likely to file cases.

According to Securities Attorney Sam Edwards, one of the partners at Shepherd, Smith, Edwards & Kantas currently representing dozens of investors who lost money in these investments, “”The recent drop in Puerto Rico bond prices have resulted in Puerto Rico bonds, and the bond funds holding Puerto Rico bonds, to give back most, if not all, of the gains of the last nine months. Bond prices have largely returned to the lows suffered in the Fall of 2013.” Mr. Edwards continues, “This is likely to result in new groups of clients coming forward as the rally in Puerto Rico debt appears to have been short-lived.”

Investors, many of them locals, took huge financial losses when two dozen Puerto Rico bond funds sponsored by UBS and Popular Securities, Inc. (Banco Popular) declined in value last year. Many of the investors are retirees and other senior investors that have now lost their life savings. However, they are not the only ones impacted.

UBS AG Under Criminal Investigation Over Puerto Rico Bond Fund Sales

Published on: June 21, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Authorities in the United States are reportedly investigating UBS AG (UBSN) for its actions in Puerto Rico. The criminal fraud investigation comes in the wake of allegations that an ex-UBS broker in Puerto Rico told clients to improperly borrow money to purchase local mutual funds that later sank.

The investigation is centered around non-purpose loans that came from UBS Bank USA of Utah. The former UBS broker, Jose Ramirez, organized the loans for clients. The bank has since let him go.

Under internal guidelines, such loans are not allowed to be used for the purchase of securities since those very securities will be the collateral for the loans. Now, however, investors are saying that Ramirez was utilizing these loans to purchase more shares in the bond funds for them. Some are even saying that he gave them paperwork that made it appear as if customers were borrowing from the UBS bank in Puerto Rico and not the one in Utah. More than 100 investors may have been affected.

Detroit, MI to Pay UBS and Bank America $85M Over Interest Swaps Settlement

Published on: March 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The city of Detroit has agreed to pay Bank of America Corp.’s (BAC) Merrill Lynch (MER) and UBS AG (UBSN) $85 million as part of a settlement to end interest-rate swaps, which taxpayers have had to pay over $200 million for in the last four years. Now, US Bankruptcy Judge Steven Rhodes must decide whether to approve the deal.

The swaps involved are connected to pension obligation bonds that were issued in ’05 and ’06. They were supposed to protect the city from interest rates going up by making banks pay Detroit if the rates went above a certain level. Instead, the rates went down, and Detroit has owed payments each month.

Under the swaps deal, the city owed $288 million. The settlement reduces the amount by 70%, which should help, as Detroit had to file for protection last year over its $18 billion bankruptcy.

Ex-UBS Global Wealth Chief Exposed by Whistleblower Pleads Not Guilty To Tax Fraud Conspiracy

Published on: January 28, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Raoul Weil, who previously served as head of UBS (UBS)’s Global Wealth Management division, has pleaded guilty to fraud conspiracy charges related to a US tax investigation probe involving the Swiss bank. Weil, 54, is accused of conspiring to help thousands of American citizens hide $12 billion at the bank.

Until his arrest last year, Weil was listed as a fugitive in the United States. In federal court in Florida, he was allowed a $10.5 million bond. His first court hearing will be in December. He has until February 12 to reverse his plea to guilty. If convicted, however, he could end up in prison for conspiracy to commit tax fraud for up to five years.

Weil was indicted because of information that UBS whistleblower Bradley Birkenfeld provided to the US Department of Justice and the Internal Revenue Service. The latter, also a former UBS banker, has since been awarded $104 million for helping the federal government start an international crackdown on tax evasion that wealthy Americans had been engaging in for decades through Swiss banks.

Detroit, MI Can’t Pay $165M to UBS & Bank of America For Swaps Deal, Rules Judge

Published on: January 21, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A bankruptcy judge says is refusing to grant the city of Detroit, MI permission to pay $165 million to Bank of America (BA) and UBS AG (UBS) to end an interest-rate swaps deal that taxpayers have been paying $202 million for since 2009. U.S. Bankruptcy Judge Steven Rhodes says the payment, in addition to a fee of over $4 million, is too costly for the beleaguered city.

Rhodes said he doesn’t believe it is in the city’s best interests to make this deal. Detroit filed the biggest municipal bankruptcy in US history due to its $18 billion debt. Prior to seeking bankruptcy protection, the city had arrived at a deal to terminate the swaps contract that it had signed with Bank of America unit Merrill Lynch (MER), UBS, and SBS Financial Products Co. for $230 million.

According to their 2009 deal, the banks are entitled to seek control of Detroit’s casino taxes, which the city pledged as cash to UBS and Bank of America. Now, Detroit may have to submit an emergency motion asking the court to protect the cash so that the banks don’t take the funds.

Billions of Dollars Have Already Been Lost by Investors in Puerto Rico Closed-End Funds that were Sold by UBS

Published on: January 10, 2014 | by Shepherd Smith Edwards & Kantas, LLP

According to new research from a consulting group, the losses of investors who purchased UBS Puerto Rico closed-end municipal bond funds is now in the billions of dollars. During the first nine months of 2013 alone, reports InvestmentNews.com, 19 of UBS’s Puerto Rico closed-end funds lost $1.6 billion. The ones that lost the most were reportedly the funds with big muni bond holdings that were underwritten by UBS.

UBS Financial Services, Inc.’s Puerto Rico unit put together and sold roughly $10 billion in closed-end bond funds between 2002 and 2012. As the funds were only registered to be sold in Puerto Rico, they were largely composed of Puerto Rico municipal bonds and could be sold only to Puerto Rican residents, who have now been hit with huge losses as the value of Puerto Rican debt has fallen sharply over the last few months.

In addition to UBS’s bond funds, other bond funds that have purchased Puerto Rican debt and investors holding individual Puerto Rican bonds in the US have been significantly impacted. In fact, if Puerto Rico were to default on its debt, the impact would be far reaching. According to Forbes.com, a default in Puerto Rico would change the price of the whole $3.7 trillion US municipal bond market, which could cost municipalities and states in the US billions of dollars in interest rate charges. Already, investors on the mainland found themselves paying close to $10 billion last year because Puerto Rico’s $52 billion in bonds were down 20% on average.

Moody’s Reassessment of Puerto Rico Bonds Does Nothing to Relieve Investor Worries

Published on: December 14, 2013 | by Shepherd Smith Edwards & Kantas, LLP

One day after Moody’s Investor Service placed Puerto Rico’s general obligation bonds rating of Baa3 on review for downgrade to junk status, the credit rating agency affirmed the ratings it had earlier in the year given four banks: Banco Santander Puerto Rico, Popular Inc. and its subsidiaries, FirstBank Puerto Rico, and Doral Financial Corporation, as well as the ratings for senior bonds put out by Doral Financial and Banco Santander Puerto Rico through the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority. The ratings outlook for First Bank, Popular, and Doral Financial stayed negative, as did Banco Santander Puerto Rico’s BFSR/BCA. (However, the outlook on that bank’s supported deposit and debt ratings are stable due to the bank’s affiliation with Santander Bank NA, which is a US affiliate.)

Puerto Rico, which is a major municipal bond issuer, has been close to or in recession for nearly a decade and has over $70 billion in debt. Moody’s said it is worried about the territory’s growing dependence on outside short-term debt, “weakening liquidity,” limited market access, and its poor economy. The credit rater believes that the fiscal and economic challenges that the territory continues to face will keep threatening the “health of the banking system.” Noting that the banks’ non-performing assets continue to remain negative relative to banks in the US mainland, the agency said that this could result in more losses if things don’t get better.

Unfortunately, many investors who got involved in Puerto Rico muni bonds were not apprised of the risks or could have never handled the high risks to begin with. Some investors have lost their retirement or life savings as a result.

Fannie Mae Sues UBS, Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, & Deutsche Bank, & Others for $800M Over Libor

Published on: December 14, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Fannie Mae is suing nine banks over their alleged collusion in manipulating interest rates involving the London Interbank Offered Rate. The defendants are Bank of America (BAC), JPMorgan Chase (JPM), Credit Suisse, UBS (UBS), Deutsche Bank (DB), Citigroup (C), Royal Bank of Scotland, Barclays, & Rabobank. The US government controlled-mortgage company wants over $800M in damages.

Regulators here and in Europe have been looking into claims that a lot of banks manipulated Libor and other rate benchmarks to up their profits or seem more financially fit than they actually were. In its securities fraud lawsuit, Fannie Mae contends that the defendants made representations and promises regarding Libor’s legitimacy that were “false” and that this caused the mortgage company to suffer losses in mortgages, swaps, mortgage securities, and other transactions. Fannie May believes that its losses in interest-rate swaps alone were about $332 million.

UBS, Barclays, Rabobank, and Royal Bank of Scotland have already paid over $3.6 billion in fines to settle with regulators and the US Department of Justice to settle similar allegations. The banks admitted that they lowballed their Libor quotes during the 2008 economic crisis so they would come off as more creditworthy and healthier. Individual traders and brokers have also been charged.

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt

Published on: November 15, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to The Wall Street Journal, hedge funds are starting to bet big on municipal debt by demanding high interest rates in exchange for financing local governments, purchasing troubled municipalities’ debt at cheap prices, and attempting to profit on the growing volatility (in the wake of so many small investors trying to get out because of the threat of defaults). These funds typically invest trillions of dollars for pension plans, rich investors, and college endowments. Now, they are investing in numerous muni bond opportunities, including Puerto Rico debt, Stanford University bond, the sewer debt from Jefferson County, Alabama, and others.

Currently, hedge funds are holding billions of dollars in troubled muni debt. The municipal bond market includes debt put out by charities, colleges, airports, and other entities. (Also, Detroit, Michigan’s current debt problems, which forced the city into bankruptcy, caused prices in the municipal bond market to go down to levels that appealed to hedge funds.)

Hedge fund managers believe their efforts will allow for more frequent trading, greater government disclosures, and transparent bond pricing and that this will only benefit municipal bond investors. That said, hedge fund investors can be problematic for municipalities because not only do they want greater interest rates than did individual investors, but also they are less hesitant to ask for financial discipline and better disclosure.