UBS Category Archives — Page 8 of 20 — Investor Lawyers Blog Published By Investment Fraud Attorneys

UBS Group Must Pay Investor $1.45M For Puerto Rico Bonds

Published on: February 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

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%.
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Bondholder Group with $17.3B in Puerto Rico Debt Proposes Debt Restructuring Plan

Published on: February 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Puerto Rico Sales Tax Financing Corporation (COFINA) has submitted a plan to restructure the financially beleaguered island’s debt. COFINA, which is comprised of investors who possess debt backed by sales-tax revenues, has issued $17.3 billion in Puerto Rico debt-$7.5 billion in senior debt and $9.7 billion in second lien debt.

COFINA’s proposal is in response to another plan submitted by the island’s development bank earlier this month. With its proposed plan, COFINA is asking Puerto Rico to suspend repayments to members of the bondholder group until 2018, when payments would steadily grow to at least $600 million by 2021.

In exchange for the delayed payment, the bondholders are asking for the preservation of the notes’ tax-backed guarantee. Already, COFINA’s payments due this fiscal year have been put aside with its bond trustee.

The bondholder’s group includes creditors such as Whitebox Advisors, Metropolitan Life Insurance and Golden Tree Asset Management. The bondholder group believes that delaying repayments for two years should give the island time to recover financially.

Senator Warren Accuses the SEC of Poor Enforcement

Published on: January 31, 2016 | by Shepherd Smith Edwards & Kantas, LLP

U.S. Senator Elizabeth Warren has issued a report in which she claims that the U.S. Securities and Exchange Commission and the U.S. Department of Justice have been doing a poor job on enforcement when it comes to going after companies and individuals for corporate crimes.

In Rigged Justice: How Weak Enforcement Lets Corporate Offenders off Easy, Warren takes a closer look at what she describes as the 20 worst federal enforcement failures of 2015. The Senator noted that that when federal agencies caught large companies in illegal acts, they failed to take substantial action against them. Instead, companies were fined for sums that in some cases could be written off as tax deductions.

Some of the 2015 cases that Warren Mentions:
• Standard & Poor’s consented to pay $1.375B to the DOJ, DC, and 19 states to resolve charges that it bilked investors by putting out inflated ratings misrepresenting the actual risks involved in collateral debt obligations and residential mortgage-backed securities. Warren Points out that the amount the credit rater paid is less than one-sixth of the fine the government and states had sought against it, and at S & P did not have to admit wrongdoing. No individuals were prosecuted in this case.

• Citigroup (C), Barclays (BARC), JPMorgan Chase (JPM), Royal Bank of Scotland (RBS), and UBS AG (UBS) paid the DOJ $5.6B to resolve claims that their traders colluded together to rig exchange rates. As a result, the firms made billions of dollars while investors and clients suffered. While admissions of guilt were sought, no individuals were prosecuted. Also, the SEC gave the banks waivers so they wouldn’t have to deal with collateral damages from pleading guilty.

Citigroup, Morgan Stanley, Goldman Sachs, and Other Big Banks to pay $63M to Virginia to Settle RMBS Fraud Claims

Published on: January 26, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The state of Virginia has arrived at a $63M settlement with 11 banks to resolve claims that they bilked the state’s retirement system by purportedly misrepresenting the quality of residential mortgage-backed securities in the run up to the 2008 financial crisis. The resolution settles all claims against the financial firms accused of causing financial harm to the Virginia Retirement system and its taxpayers and pensioners.

The banks involved will pay the following amounts respectively to settle, including:

· UBS Securities for $850K
· Bank of America’s Merrill Lynch, Pierce, Fenner & Smith, Inc. and Countrywide Securities Corp. (BAC) for $19.5M
· Credit Suisse Securities (CS) for $1.2M
· RBS Securities (RBS) for $10M
· HSBC Securities (HSBC) For $2.5M
· Barclays Capital (BARC) for $9M
· Goldman Sachs & Co. (GS) for $2.9M
· Morgan Stanley & Co. (MS) for $6.9M
· Citigroup Global Markets (C) for $4.8M
· Deutsche Bank Securities (DB) for $5.6M

The state lost $383M over RMBS it purchased from 2004 to before 2010 and it had to sell most of these securities, which were toxic and constructed on junk mortgages. The settlement is the largest non-healthcare related financial recovery in a case involving Virginia Fraud Against Taxpayers Act-related violations. However, according to the state’s Attorney General Mark Herring, even though the firm is settling it is not denying or admitting liability.

UBS Shutters MLPL and MLPV Funds Following Millions of Dollars in Investor Losses

Published on: January 25, 2016 | by Shepherd Smith Edwards & Kantas, LLP

UBS AG (UBS) is reportedly closing down two of its exchange traded note (ETN) funds that were concentrated in master limited partnerships:

· The $11M ETRACS 2x Monthly Leveraged S&P MLP Index ETN (MLPV), which was just issued last July

· The $113M ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL)

Puerto Rico Will Make $330M in Bond Payments, Defaults on About $37M

Published on: December 31, 2015 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Commonwealth of Puerto Rico will pay about $330 million of what it owes on general obligation bonds, while defaulting on bonds of approximately $37 million that are mostly owed to the Puerto Rico Infrastructure Financing Authority (Prifa) and the Public Finance Corp. Puerto Rico general obligation debt is constitutionally-guaranteed and some of the money to pay for that debt had been originally earmarked for bonds that do not have as strong of legal protections.

This has led to Financial Guaranty Insurance Co. and Ambac Financial Group Inc., which together insure over $860 million in Prifa bonds, sending a letter to Puerto Rico government officials. In the note, they called the redirecting of the funds illegal.

This is not the first time Puerto Rico has defaulted on bond payments owed. It missed payments last year and its government has already warned that further payments may be missed this year. The territory owes investors approximately $72 billion.

In December, the Puerto Rico Electric Power Authority (PREPA) arrived at a partial-default deal with bond insurers and creditors, reducing debt payments by almost 50% every year for the next five years. Creditors would take a 15% loss in exchange for stronger legal claims on the debt that is left. However, legislation still must be approved to finalize the arrangement.

Worries that creditors will sue has led to Puerto Rico asking the U.S. Congress to grant it bankruptcy protection so it can file for Chapter 9. One of the purposes of the latest bond payment plan is to delay these possible lawsuits while the territory buys more time to work out a deal with negotiators. And, while Democrats and the White House have asked Congress to pass legislation that would let the island restructure its debt, Republican lawmakers have thwarted those efforts. Now, many are expecting these creditor lawsuits in the coming days.
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Court Refuses to Overturn Criminal Conviction of Ex-UBS/Citigroup Trader

Published on: December 28, 2015 | by Shepherd Smith Edwards & Kantas, LLP

In the U.K., a panel for the Court of Appeal refused to overturn the criminal conviction of ex-UBS (UBS) and Citigroup (C) trader. Tom Hayes is behind bars for conspiring to rig Libor. However, while his conviction will stand, the panel did lower his criminal sentence from 14 years to 11 years, citing his non-managerial role at the two banks and his diagnosis of mild Asperger’s.

Hayes is considered the main leader, spurring dozens of traders to manipulate the London interbank offered rate. However, his lawyers claim that Hayes did not hide his conduct from others at the bank and never considered his actions dishonest. Hayes said that his behavior was common in his industry.

When he voluntarily testified before prosecutors, Hayes admitted to manipulating rates. He also testified against a number of ex-friends and colleagues. Hayes also is facing criminal charges in the U.S.

Libor helps shape the borrowing costs for trillions of dollars in loans. Banks set rates, including Libor, by turning in rates at which they would be willing to lend each other money in different currencies and at different maturities.

Morgan Stanley, JPMorgan, Barclays and Other Banks To Pay $1.86B to Settle Credit Default Swaps Price Fixing Claims

Published on: October 20, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Details of the settlement involving a dozen big banks accused of conspiring to rig prices and restrict competition in the credit default swaps market have been released. According to papers filed in federal court in Manhattan last week, the following firms will collectively pay nearly $1.9 billion:

· JPMorgan Chase & Co. (JPM): $595M

· Morgan Stanley (MS): $230M

· Barclays Plc (BARC): $178M

· Goldman Sachs (GS): $164M

· Credit Suisse (CS): $159M

· Bank of America Corp. (BAC): $90M

· Deutsche Bank (DB): $120M

· BNP Paribas (BNP): $89M

· Citigroup (C): $60M

· Royal Bank of Scotland (RBS): $33M

· HSBC Holdings Plc (HSBC): $25M

UBS Advisory Firms To Pay Investors $13M For Failure to Disclose Closed-End Fund Strategy Modification

Published on: October 19, 2015 | by Shepherd Smith Edwards & Kantas, LLP

UBS Fund Advisor LLC and UBS Willow Management LLC will pay $17.5M, including $13 million to investors that were hurt to resolve Securities and Exchange Commission charges accusing them of failing to disclose that there was a change in an investment strategy involving closed-end fund UBS Willow Fund LLC. The two UBS (UBS) advisory firms have advised the fund.

The SEC contends that from 2000 through 2008, UBS Willow Management – which was a joint venture between an outside portfolio manager and UBS Fund Advisor – invested the assets of the Willow Fund in line with the strategy discussed in marketing collateral and offering documents. However, according to the regulator’s order that instituted a settled administrative proceeding, in 2008, the fund advisor changed tactics and went from focusing on investments in debt put out by beleaguered companies to buying big amounts of credit default swaps.

The Willow fund started to sustain huge losses because of the credit default swaps, which went from 2.6% of the fund’s market value in ’08 to over 25% by March ’09. The fund was eventually liquidated three years later.

The SEC says that UBS Willow Management failed to notify its board of directors or the fund’s investors that the investment strategy had changed. For a time, a marketing brochure given to prospective investors misstated the strategy of the fund, and letters to investors included misleading or false information about credit default swap exposure.
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UBS To Pay $19.5M Over Notes Tied to Currency Index

Published on: October 14, 2015 | by Shepherd Smith Edwards & Kantas, LLP

UBS AG (UBS) has agreed to pay $19.5 million to resolve SEC charges accusing the firm of making misleading or false statements and omissions in offering materials for structured notes connected to a proprietary strategy for foreign exchange trading. The firm is accused of falsely stating to investors in the United States the structured notes linked to the V10 Currency Index with Volatility Cap were dependent upon a systematic and transparent strategy for currency trading that employed market prices to calculate the financial instruments that were underlying the index. The SEC said that UBS made undisclosed hedging trades, which lowered the index price by as much as 5%. The firm is settling without denying or admitting to the regulator’s findings.

About 1900 US investors purchased approximately $19M of structured notes connected to the index from December ’09 to November ’10. The SEC contends UBS did not have an effective procedure, policy, or process for making sure that the individuals mainly responsible for the offering documents for the notes in the US knew that UBS employees in Switzerland were taking part in practices that could hurt the price inputs for calculating the V10 Index. The firm also purportedly did not disclose that it took unwarranted markups on hedging trades, hedged trades with non-systemic spreads, and traded prior to certain hedging transactions.
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