UBS Financial Services of Puerto Rico Ordered to Pay Investors $793,000 Over Muni Bond Sales

A Financial Industry Regulatory Authority (“FINRA”) arbitration panel has awarded two investors $793,000 in their Puerto Rico municipal bond fraud case against UBS Financial Services (UBS) and UBS Financial Services of Puerto Rico (UBS-PR). The claimants, Madeleine Carrero (as an in individual and as the trustee of Ulises Barros Carrero and Fideicomiso Ulises Barros), accused UBS of negligence, misrepresentation, breach of fiduciary duty, unauthorized trading, unsuitability, and breach of contract.

This is the latest ruling in which UBS and its Puerto Rico-based brokerage firm have been ordered to pay investors for the losses they suffered from investing in Puerto Rico bonds and closed-end bonds.

On the island and the U.S. mainland, our UBS Puerto Rico bond attorneys are continuing to work with investors seeking to recover their losses from investing in Puerto Rico securities. Many investors lost everything, with some even borrowing funds at the inappropriate recommendation of their advisor so that they could invest even more in the island’s bonds.

If you think that you may have grounds for a Puerto Rico bond fraud claim against UBS Puerto Rico, Santander Securities (SAN), Banco Popular or another brokerage firm, it’s not too late to file your claim. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Bond Insurers File Lawsuit Against Puerto Rico Financial Oversight Board
In other Puerto Rico debt news, National Public Finance Guarantee Corp, which is an MBIA Inc. unit, and Assured Guaranty Ltd. are suing Puerto Rico’s financial oversight board. They are seeking a court order that would make the board accept the current $9 billion debt agreement covering the Puerto Rico Electric Power Authority (“PREPA”). The bond issuers are claiming that approval of the deal is being improperly withheld.

Under the current deal, the electrical authority’s bondholders would get new debt valued at 85% of their principle. This would be paid from a new charge to be billed to utility customers in the Commonwealth. Without the Board’s approval, however, PREPA could end up in court-protected bankruptcy proceedings just like the Puerto Rico government and a number of its other agencies.

The oversight board recently proposed a counteroffer to the electrical authority’s creditors that would revise the terms of the current agreement. However, the bond insurers are contending that the board does not have the authority to propose such an offer. If the electrical authority were to file for Title III too, a judge would get to decide how much PREPA bondholders would be repaid.

Title III
Title III was established just for Puerto Rico, which is not a municipality under U.S. law and therefore could not file for Chapter 11 bankruptcy protection. The island contends that the bankruptcy proceedings activated an automatic stay of debt payments.

Meantime, Puerto Rico has directed Bank of New York Mellon Corp. (“BNY Mellon”) not to issue a debt payment on Highways and Transportation Authority (“PRHTA”) bonds that is due to investors on July 1. The territory’s government said that the funds should stay with the agency while it undergoes bankruptcy proceedings to lower its debt.

Although Puerto Rico and the majority of its agencies have stopped issuing debt payments owed to investors, PRHTA has kept issuing its investor payments using reserve funds. In its lawsuit, Puerto Rico warned BNY Mellon that it might hold the latter liable for damages if the trustee issued the $222 million of principal plus interest that is due. PRHTA owes about $4 billion of debt that is outstanding.

To schedule your free case consultation, contact our Puerto Rico UBS bond fraud attorneys today.

UBS loses $793,000 in Puerto Rico bond arbitration case, InvestmentNews, June 28, 2017

Puerto Rico Tells Trustee Not to Cover Payment on Highway Bonds, Bloomberg, June 26, 2017