UBS Financial Services to Pay Investor Almost $1M in Puerto Rico Closed-End Bond Fraud Case

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered UBS Financial Services (UBS) to pay Ana Elisa Ciordia-Robles almost $1 million, including  $751,000 in compensatory damages and additional sums for legal fees and costs. Ciordia-Robles accused UBS of negligent supervision, breach of fiduciary duty, fraud, negligence, breach of contract, and violations of the Puerto Rico Uniform Securities Act, the Securities and Exchange Commission’s Rule 10b-5, and the Securities Exchange Act’s Sections 10(b). More specifically, Ciordia-Robles claimed she sustained losses from investing in UBS Puerto Rico (UBS-PR) closed-end bond funds.

When Puerto Rico muni bonds dropped in value in 2013, many investors on the island and in the mainland sustained huge investment losses. In the last few years, UBS and UBS-PR       have been the subject of thousands of customer complaints over their sale of Puerto Rico municipal bond and proprietary bond funds. Claimants are alleging that these investments were unsuitable, that high concentrations of these investments were recommended, and that UBS never apprised them of the risks involved in the closed-end bond funds that they were sold. Many of these investors have since realized that their portfolios were never equipped to handle these risks.

It was just last  year that UBS consented to pay about $34 million to US regulators to settle allegations related to its supervision of the sale of the Puerto Rico bond funds and use of leverage against those closed-end funds. UBS has already settled a number civil claims brought by investors through FINRA arbitration.  At Shepherd Smith Edwards and Kantas, LTD LLP our securities lawyers have been working hard to help quite a number of these investors  recoup these losses.

Puerto Rico has been struggling to pay back the $70 billion debt that it owes. Last week, a federal judge upheld a U.S. law preventing creditors from filing lawsuits against the U.S. territory until February 2017. The stay on such lawsuits is meant to give the island a bit of a breather so that it can try to restructure its debt with the help of the newly appointed federal oversight board.

Judge Francisco Besosa issued his ruling about the stay in the creditor lawsuit brought by Altair Global Credit Opportunities Fund, Assured Guaranty Corp., and Peaje Investments LLC against Puerto Rico’s government and its outgoing governor, Alejandro Garcia Padilla. However, Besosa also told the U.S. territory to continue negotiating with creditors even while the stay is in effect.  A number of creditors, including hedge funds, had sought to have the stay removed or vacated. The stay is part of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which is the legislation recently signed into law by President Barack Obama.

The financial situation on the island is so bad that the Puerto Rican city of Toa Baja has had to shut down its government due to a lack of funds. Toa Baja is located in the suburbs of San Juan and it has $33M in outstanding debt. According to SourceMedia, other municipalities on the island may also have to shut down their governments.

At Shepherd Smith Edwards and Kantas, Our Puerto Rico close-end bond fraud lawyers and our Puerto Rico bond fraud lawyers are already representing dozens of customers seeking to recoup losses from UBS and UBS-PR and we also represent investors with claims against other brokerage firms, including Banco Popular and Banco Santander. Contact us today.

UBS to Pay Close to $1M in another Puerto Rico Claim, InvestmentNews, November 7, 2016

Judge upholds blocks on creditor lawsuits against Puerto Rico, Reuters, November 3, 2016