Since at least 2011 UBS Financial has recommended UBS Puerto Rico Closed End bond Funds (CEFs) . Such funds were leveraged perpetual baskets largely of Puerto Rico agency bonds; UBS promoted them as having had significant tax advantages and an interest rate averaging in excess of 6%: and were legally available only to residents of Puerto Rico. UBS documents stated that these securities were suitable as one component of a well-balanced portfolio.
It has since been determined in a detailed and recent May 18, 2015 FINRA arbitration award, which returned to the investor Juan Burgos Rosado 100 cents on the dollar, that the market for such CEFs, being limited to residents of Puerto Rico, was necessarily thin; that it had been to a large extent saturated and liquidity was limited; that UBS, though not required to do so, had essentially made a market until it determined to reduce its inventory of CEFs. In the process of reducing its exposure in the CEFs by some 75%, UBS undertook an internal push for its brokers to sell its inventory to customers, demonstrating a clear conflict of interest. Many UBS accounts of Puerto Rico residents were over-concentrated in the CEF and brokers received internal memos confirming such. Broker’s were representing to investors that they would receive their full principle back and not to worry about drops in value as per their statements. UBS even offered loans to customers so as to avoid them selling CEFs into the market. Many investors did not know that there was a little liquidity to the market allowing for the sale of such securities without huge losses.
The recent FINRA panel found that the UBS account at issue was unsuitable for Claimant, at age 66 essentially a first-time senior Investor with no experience; “that a proper effort to know her customer would have revealed that to his Broker; that the account was grossly overconcentrated; that any proper UBS branch office or other review should have detected such obvious unsuitability; and that any proper and required supervision could have prevented Claimant’s losses or at least limited them greatly. The record instead shows that UBS intentionally transferred some of its risk in its CEF inventory to its customers one of whom was Claimant.”
The FINRA panel awarded the investor 1 million dollars to the investor of which $602,000 was compensatory damages and interest.
The Meissner firm, FINRA Arbitration Attorneys, known for its selective retention and record win statistics, and history of successful claims against UBS, is investigating UBS’s sale of CEF Puerto Rican Bond Funds to investors and accepting FINRA Arbitration cases on a full contingency basis . If you were a victim of UBS’s sale of Puerto Rico CEF bond Funds call for a completely free confidential consultation directly with Mr. Meissner 212-764-3100 or toll free 866-764-3100.