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UBS Ordered to Pay $9.3M for Puerto Rico Bond Fraud

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.

While a number of brokerage firms have come under fire for selling these Puerto Rico securities, which plunged in value beginning around six years ago and resulted in many investors suffering devastating losses, UBS is considered the greatest offender by many. Not only was it the most active broker-dealer to push these investments onto customers, but also it created proprietary closed-end bond funds that were “heavily invested” in the island’s bonds and encouraged investors to borrow from credit lines so they could invest even more money in these investments. UBS  loaded the funds up with “local” Puerto Rico bonds that were only tax-free on the island and therefore had a very limited market.

There is also evidence that UBS pressured its brokers to sell Puerto Rico bonds and closed-end bond funds even when it was clear to the firm that doing so was not in the best interests of customers. Some former UBS brokers have even filed their own claims against UBS arguing they suffered losses themselves, along with recommending that their family and friends invest. According to those brokers, they too were duped by UBS and suffered losses.

While some UBS Puerto Rico brokers may have a legitimate argument that they were misled, there were UBS brokers that were in on the fraud, including Jose G. Ramirez-Arone Jr., who earlier this year was sentenced to a year in prison. Known as “The Whopper,” Ramirez-Arone admitted that he convinced clients to invest in UBS Puerto Rico bond funds and got them to borrow money against their investments from a credit line that came from UBS bank. The former UBS broker earned over $1.2 million in commissions from those illegal sales.

UBS Puerto Rico Investor Fraud Attorneys
At Shepherd Smith Edwards and Kantas, LTD LLP (SSEK Law Firm), our UBS Puerto Rico investor fraud lawyers have been successfully hard at work over the last six years working with clients throughout the Commonwealth and the U.S. mainland to help them get back the money lost from investing in these securities. We also represent investors with Puerto Rico bond fraud claims against other brokerage firms, including Oriental Financial Services, Santander Securities, and Popular Securities. Contact us today for a free, no obligation consultation to learn about your options.

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