The Law Offices of Robert Wayne Pearce, P.A. is currently investigating the UBS Puerto Rico bond funds and seeking to recover losses of many investors residing in Puerto Rico. Many investors purchased the island’s debt through closed-end mutual funds, which in many cases held more than 70 percent of assets in Puerto Rican bonds and employed leverage. The steep decline in Puerto Rican bond prices is believed to be linked to worries about Puerto Rico’s shrinking economy, double-digit unemployment rate, and individual debt. Such fears ignited a wave of selling that briefly pushed some Puerto Rican bond yields to over 10 percent, which in turn caused bond prices to spiral downward.
UBS Puerto Rico is the island’s market leader in closed-end funds, operating more than a dozen bond funds such as:
- Tax-Free Puerto Rico Fund, Inc.
- Tax-Free Puerto Rico Fund II, Inc.
- Tax-Free Puerto Rico Target Maturity Fund, Inc.
- Puerto Rico AAA Portfolio Target Maturity Fund, Inc.
- Puerto Rico AAA Portfolio Bond Fund, Inc.
- Puerto Rico AAA Portfolio Bond Fund II, Inc.
- Puerto Rico GNMA & US Govmt. Target Maturity Fund, Inc.
- P.R. Mortgage-Backed & US Govmt. Securities Fund, Inc.
- Puerto Rico Fixed Income Fund, Inc.
- Puerto Rico Fixed Income Fund II, Inc.
- Puerto Rico Fixed Income Fund III, Inc.
- Puerto Rico Fixed Income Fund IV, Inc.
- Puerto Rico Fixed Income Fund V, Inc.
- Puerto Rico Fixed Income Fund VI, Inc.
UBS Puerto Rico also served as a co-underwriter and co-manager of the following closed-end funds:
- Puerto Rico Investors Tax-Free Fund
- Puerto Rico InvestorsTax-Free Fund II
- Puerto Rico InvestorsTax-Free Fund III
- Puerto Rico InvestorsTax-Free Fund IV
- Puerto Rico InvestorsTax-Free Fund V
- Puerto Rico InvestorsTax-Free Fund VI
- Puerto Rico Tax-Free Target Maturity Fund
- Puerto Rico Tax-Free Target Maturity Fund II
- Puerto Rico Investors Bond Fund
Many of these closed-end funds have declined between 50 and 60 percent. Santander Securities and Popular Securities also manage closed-end funds with Puerto Rican bond holdings that suffered losses.
In May of 2012, UBS Puerto Rico settled with the Securities and Exchange Commission (SEC) for $26.6 million over claims alleging that UBS Puerto Rico misrepresented and omitted material facts related to the above-listed bond funds. Many of the funds were leveraged (purchased with borrowed funds), which magnified investors’ losses. However, investors may be able to recover their investment losses by filing Financial Industry Regulatory Authority (FINRA) arbitration claims against UBS Puerto Rico that would be heard in San Juan, Puerto Rico.
UBS FINANCIAL SERVICES INC. OF PUERTO RICO CLOSED-END BOND FUNDS
We have successfully represented over 75 investors in arbitrations against UBS-PR and are still accepting cases against UBS Financial Services Incorporated of Puerto Rico (UBS-PR). Our latest arbitration resulted in a $5.88 million securities fraud award against UBS-PR. Please call us if you have not filed a claim as time is running out to do so. We know what happened behind the scenes and why over 10,000 UBS-PR clients suffered over $1 billion in losses investing in UBS-PR sponsored Puerto Rico closed-end bond funds and Puerto Rico municipal bonds.
The UBS-PR integrated business model was to become the dominant investment banker, investment advisor, and brokerage firm in the Puerto Rico credit market. UBS-PR was a consultant to the Government Development Bank of Puerto Rico (“GDB”) and the government of the Commonwealth of Puerto Rico and underwriter of many of the Commonwealth and its enterprise agencies’ municipal bonds (“Puerto Rico Bonds”). Beginning in the mid-1990s, to facilitate the growth of its business, UBS-PR became the issuer, manager, and/or co-manager of 23 closed-end bond mutual funds (the “UBS-PR Closed-End Funds”). UBS-PR acted in conflict with its duties as a fiduciary under federal and Puerto Rico law by placing its integrated business model of dominance of the Puerto Rico credit market over the interests of its clients.
UBS-PR’s management pushed its brokers to encourage investors to purchase and hold concentrated positions in Puerto Rico Bonds and in shares of the UBS-PR Closed-End Funds. The UBS-PR Closed-End Funds became the depository of many Puerto Rico Bonds that UBS-PR purchased in connection with its investment banking business. UBS Trust, a UBS-PR affiliate, managed or co-managed the UBS-PR Closed-End Funds. UBS-PR controlled the secondary market trading of the UBS-PR Closed-End Funds, and UBS Trust used leverage to enhance fund yields and attract investors. In addition, UBS-PR encouraged its registered representatives to solicit investors to leverage their investments and open “Repo/Reverse Repo Accounts” and take out lines of credit through UBS’ affiliate, UBS Bank (USA) from the state of Utah, and unwittingly double the leverage risk clients were exposed too. It has been estimated that 9 out of 10 investors in Puerto Rico owned Puerto Rico Bonds and UBS-PR Closed-End Funds.
The typical UBS-PR arbitration claim arises out of a series of unsuitable securities recommendations by a UBS-PR and UBS financial advisor that investors purchase then hold an excessive concentration of Puerto Rico Bonds and UBS-PR Closed-End Funds. As a result, UBS-PR customers’ investment portfolios were not diversified from not only an asset allocation standpoint but also overly concentrated in securities issued in a single geographic area – Puerto Rico. The excessive concentration in Puerto Rico securities and leverage strategy implemented made the accounts highly speculative, which was inconsistent with many UBS-PR clients’ investment objectives and UBS-PR and UBS financial advisors’ representations. Through its representatives, UBS-PR disseminated false and misleading information to customers about the nature, mechanics, and risks of owning leveraged and concentrated positions in Puerto Rico Bonds and UBS-PR Closed-End Funds and the investment strategy employed in many of their best clients’ accounts.
In so doing, UBS-PR and its representatives not only violated the Puerto Rico Uniform Securities Act (“PRUSA”), but also committed common law securities fraud, breached their fiduciary duties to investors, breached their contracts and the FINRA Code of Conduct, and were negligent in advising their clients on how to safeguard their investment capital. We have alleged and proven that UBS-PR negligently failed to supervise its employees in connection with the management of customers’ accounts. As a result of UBS-PR and its stockbrokers misconduct, customers suffered over $1 billion in damages, and we have recovered over $50 million for our clients.
OUR CURRENT CASES AGAINST UBS PUERTO RICO
Our firm has filed claims on behalf of UBS Puerto Rico investors. We have summarized the allegations our clients have made against UBS Puerto Rico to help our readers decide whether they should investigate and possibly bring claims against that brokerage firm themselves. Please read these summaries and if you believe the facts and circumstances are similar, contact us for a free consultation.
- The Law Offices of Robert Wayne Pearce, P.A. Wins $6 Million Plus Award Against UBS and UBS Puerto Rico
- The Law Offices of Robert Wayne Pearce, P.A. Wins $1.45 Million Plus Interest Award Against UBS and UBS Puerto Rico
- The Law Offices of Robert Wayne Pearce, P.A. Wins $600,000 Plus Interest Award Against UBS Puerto Rico
- The Pearce Law Firm Files First Claim Against UBS Puerto Rico
- Eighty Year Old Investor Sues UBS Puerto Rico
- Another UBS Puerto Rico Investor Sues Brokerage For Unsuitable Investments
- UBS Puerto Rico Misrepresents Safety of Bond Funds to Investor
- Retired Couple Lose Life Savings Due To Santander Securities Stock Recommendations
- UBS Puerto Rico Made Unsuitable Recommendations To Pledge Closed-End Funds Against Bank Loans
- Santander Securities Broker Switches Investors Into Unsuitable Closed End Funds
- Merrill Lynch Puerto Rico Stockbroker Wipes Novice Investor Out With Bond Transactions on Margin