COVID-19 UPDATE: We're Open and Ready to Serve Our ClientsLearn More Here

Articles Tagged with UBS Puerto Rico

UBS Loses Another Puerto Rico Bonds & Closed-End Fund Case

More than six years after thousands of investors lost many millions of dollars from investing in Puerto Rico bonds and closed-end bond funds, UBS Puerto Rico (UBS-PR) is still being held to account for the financial losses faced by many of its clients. 

This includes one claimant who was recently awarded over $150,000 in compensation plus interest, other costs, and fees in her Financial Industry Regulatory Authority (FINRA) arbitration case against the firm.  

SSEK Investigating Investor Claims Against Ex-UBS Puerto Rico Broker 

For the last several years, Shepherd Smith Edwards and Kantas, LLP (“SSEK Law Firm”) has been actively working with investors to recover the massive losses they sustained because brokers and their firms recommended that they invest in Puerto Rico bonds and closed-end bond funds. 

SSEK Law Firm continues to investigate such claims, including those involving UBS and its brokers. David Jose Lugo (“Lugo”) is one of these former UBS registered representatives and SSEK Law Firm is very familiar with Lugo. 

UBS Group Fined $51M By Hong Kong Securities Regulator

The Hong Kong Securities and Futures Commission (SFC) is ordering UBS Group AG (UBS) to pay a $51M fine for overcharging clients between 2008 and 2017. It is also ordering the Swiss banking giant to pay more than $25M in compensation to customers that were harmed. 

According to the Hong Kong regulator, about 5,000 clients paid more than they should have in approximately 28,700 transactions. This happened after UBS advisors and assistants added padding to spreads involving bonds, as well as structured note trades and charging extra fees. UBS Group is accused of not disclosing to clients that they were paying these fees. 

Two different groups of investors were recently awarded nearly $9.3 million in their respective Puerto Rico bond fraud claims against UBS Financial Services (UBS). These are just the latest Financial Industry Regulatory Authority (FINRA) arbitration claims where the Swiss giant and its Puerto Rico-based brokerage firm have been ordered to pay customers after selling over $10 billion of closed-end funds that were heavily invested in the island’s municipal debt. To date, UBS has paid hundreds-of-millions-of-dollars to investors in either arbitration awards or settlements.

In one of these latest Puerto Rico investor fraud cases, the claimants are three investors and their related businesses and trusts. The customer claimants contend that UBS violated FINRA’s rules and the U.S. territory’s securities laws, as well as committed other fraudulent acts. Now, the FINRA arbitration panel has awarded them $4.25 million in compensatory damages, interest, and $170,000 for costs.

In the other Puerto Rico bond fraud claim, the claimants were customers alleging constructive fraud, common law fraud, breach of fiduciary duty, negligent misrepresentation, negligent supervision, breach of contract, and fraudulent concealment. The FINRA arbitration panel awarded them $4.8 million in damages.

Jose G. Ramirez-Arone Jr., who formerly worked as a broker for UBS Financial Services of Puerto Rico (UBS-PR), has been sentenced to a year and a day in prison for defrauding investors. Ramirez-Arone, also called Jose Ramirez and known by many on the island of Puerto Rico as “The Whopper,” pleaded guilty to bank fraud last year.

Ramirez admitted that he made more than $1.2 million in improper commissions by persuading clients to inappropriately invest in UBS Puerto Rico Bond Funds. More specifically, Ramirez admitted to participating in a scheme where he advised his clients to borrow money against their investments from a credit line at UBS Bank and then to use that borrowed money to buy more UBS Puerto Rico Bond Funds. This use of “non-purpose” loans to buy securities was strictly prohibited.

Unfortunately, in addition to being a prohibited transaction, this type of investing – where leverage is used to buy an already leveraged investment product – is unsuitable for most investors. The vast majority, if not all, of these investors were ill-equipped and unable to handle the risks involved, which they are now claiming were misrepresented or not fully disclosed to them. When Puerto Rico bonds and closed-end bond funds plunged in value in 2013, many UBS clients ended up having to sell their investments because they lacked the assets to satisfy maintenance calls on their accounts, resulting in massive losses for some.

Jose G. Ramirez-Arone Jr. (also known as Jose G. Ramirez, Jr.), a former UBS Financial Services of Puerto Rico (UBS-PR) broker, has pleaded guilty to criminal charges accusing him of defrauding investors while making over $1 million in improper commissions through the sale of Puerto Rico closed-end funds. Ramirez-Arone is scheduled to be sentenced next year.

The former UBS broker, known to many on the island as “Whopper,” and UBS Puerto Rico have together been the subject of dozens of Financial Industry Regulatory Authority (FINRA) arbitration complaints brought by customers claiming they sustained massive investment losses because not only did UBS and Ramirez-Arone sell the customers Puerto Rico bonds while misrepresenting the risks, but also, the finer broker recommended that they borrow money to purchase even more of these securities when they could not afford them.

Ramirez-Arone was one of the top-selling brokers at UBS Puerto Rico. In his guilty plea, Ramirez-Arone admitted that he was involved in a scam to help his UBS customers fraudulently obtain non-purpose credit lines, which was a violation of the firm’s policy. The credit lines came from UBS Bank USA, which is a UBS Financial Services subsidiary based in Utah. According to the U.S. Department of Justice, Ramirez-Arone took advantage of the low interest rates at UBS bank to convince his customers to buy additional shares of UBS’s Puerto Rico closed-end funds (CEFs). The former UBS broker acknowledged being a part of a scheme that involved recommending to different clients that they take money from the UBS Bank credit lines to invest to in the UBS Puerto Rico closed-end bond funds. Since using a “non-purpose” loan to buy additional securities is not allowed, Ramirez-Arone admitted advising customers to misrepresent on their credit line application what they intended to use the credit line and having the clients take the borrowed money to their retail bank and then bring the money back to UBS to buy more securities.

UBS Financial Services, Inc. (UBS) and two investors will now arbitrate a Puerto Rico closed-end bond fraud lawsuit accusing the investment arm of the Swiss bank of improperly structuring investments. The plaintiffs, Augusto Schreiner and Nora Fernandez, contend that UBS, its Puerto Rican subsidiaries, firm executives, and Banco Popular de Puerto Rico failed to suitably examine nearly two dozen closed-end mutual funds that held the beleaguered island’s government bonds.

Schreiner and Fernandez were initially part of an attempt to file a class action lawsuit against UBS and its subsidiaries. However, last month, US District Court Judge Sidney H. Stein refused to grant the case class certification status.

The Court found that because all of the plaintiffs had different investment objectives, they would not be able to demonstrate that the mutual funds were unsuitable in general. Judge Stein ruled that it was up to each investor to prove individually, according to their respective needs, objectives, and ability to handle risk, that UBS had neglected to properly analyze the risks that came with the funds.

A Financial Industry Regulatory Authority (FINRA) arbitration panel is ordering UBS Financial Services (UBS) and UBS Financial Services of Puerto Rico (UBS-PR) to pay investor Jose F. Pastrana $693K, including at least $564,559 in damages, legal fees, and other costs in its Puerto Rico bond fraud case. UBS also must buy back from Pastrana some of the illiquid closed-end funds that he purchased from the firm at what their market price was at the end of July. AdvisorHub says that this amount will total $128K.

Pastrana had accused the broker-dealer of:

  • Negligence

A Financial Industry Regulatory Authority panel is ordering UBS Financial Services Inc. (UBS) to pay restitution of almost $19.8M in an arbitration case involving Puerto Rico bonds and closed-end funds that were sold to investors. This is the largest amount that UBS has paid to date to claimants in a Puerto Rico bond fraud case.

The arbitration ruling involved not only the sale of the Puerto Rico bonds but also how credit lines were used as part of the investing strategies involving the investor accounts. Of the $19.8M: $14.9M is for compensatory damages, $745K is interest, $3.9M is legal fees, and $215K is for other costs.

This is just one of several Puerto Rico bond and closed-end bond fraud awards that UBS and its affiliated financial firm, UBS Financial Services of Puerto Rico (UBS-PR), have been ordered to pay in the last few years. In December 2016, A FINRA arbitration panel ordered UBS to pay $18.6M to two UBS clients who had alleged breach of contract, breach of fiduciary duty, and other violations over their Puerto Rico securities losses.

U.S. District Judge Sidney H. Stein is refusing to grant class action certification to a group of investors suing UBS Puerto Rico over its sale of proprietary closed-end mutual funds. In particular, the class action complaint dealt with a series of 23 closed-end bond funds that UBS Puerto Rico developed and marketed exclusively to Puerto Rico residents.

These proprietary closed-end funds were comprised of at least 2/3 Puerto Rico debt (and often much higher), resulting in a geographic concentration that placed the owners of such funds at a great risk if anything negative happened on the island. Additionally, the UBS closed-end funds were highly leveraged, typically borrowing $1 for every $1 invested, meaning that any losses in the closed-end funds would be significantly increased.

Notwithstanding the above, the plaintiff investors say that UBS falsely depicted these closed-end mutual funds as safe and secure investments that would garner fund holders tax-free income when, in truth, the mutual funds were “ticking time bombs” that were actually very risky.

Contact Information