UBS Ordered To Pay More Than $18 million in Puerto Rico Closed-End Bond Fraud Arbitration Award

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.

At Shepherd Smith Edwards and Kantas, our Puerto Rico securities fraud attorneys have spent the last three years working with investors in trying to recoup their losses. We represent clients in the US and in Puerto Rico.

Puerto Rico Bond Fraud Cases Against UBS 
Many investors who worked with UBS brokers have said that not only did the firm’s financial representatives encourage to them to invest in Puerto Rico’s municipal bonds, but also these brokers recommended that they borrow funds so they could invest more. The investors also claim that the UBS financial representatives did not apprise them of the risks they were taking on. This is why so many investors were caught off guard when they sustained catastrophic losses after the bonds fell so far in 2013. Puerto Rico has been struggling to cope with its $70 billion of debt since then.

If you are an investor who has sustained losses from investing in Puerto Rico bonds, please contact our securities law firm today. We work with retail investors, high net worth individual investors, and institutional clients on the island and the mainland. Your initial consultation with one of our experienced municipal bond fraud lawyers is a free, no obligation, session.

UBS to Pay $18.6M Total to Puerto Rican Couple Over Closed-End Funds, ThinkAdvisor, December 6, 2016

Read the FINRA Arbitration Award in the UBS/Puerto Rico Closed-End Bond Fraud Case  (PDF)