\t\t\t\tA Financial Industry Regulatory Authority (FINRA) arbitration panel says that UBS Financial Services (UBS) must pay $18.6 million to customers Rafael Vizcarrondo and Mercedes Imbert De Jesus for their losses from investing in Puerto Rico closed-end bond funds.\u00a0 The two investors, both UBS clients, accused the broker-dealer of breach of contract, breach of fiduciary duty, and other securities violations. They claim that UBS placed their money in unsuitable investments and did not properly supervise the broker who worked with them. As part of the award, Impert De Jesus and Vizcarrondo will receive $12.7 million in compensatory damages, $2.5 million of interest, $3.2 million in legal fees and $163,000 in expert witness fees.<\/p>\n
Vizcarrondo is a prominent lawyer in Puerto Rico. His legal team said that UBS had attempted to portray him as a \u201csophisticated\u201d investor, someone who should have known what he was getting involved in when he invested in the territory\u2019s bonds.\u00a0\u00a0The firm described Vizcarrondo as having been \u201cfully informed\u201d when he decided to concentrate his investments in UBS\u2019s Puerto Rico closed-end funds. However, as Vizcarrondo\u2019s attorney noted, not all professionals are \u201csophisticated investors.\u201d Based on its decision, the FINRA arbitration panel obviously agreed with the claimant.<\/p>\n
This is the largest FINRA arbitration award issued over Puerto Rico bond funds to date. There are over a thousand cases still pending. These claims were brought by investors seeking to recover the financial losses they suffered from investing in the island\u2019s beleaguered securities. Although a number of firms, including Banco Santander (SAN), Banco Popular, Merrill Lynch and others have been named in Puerto Rico bond and closed-end bond fraud claims, UBS and affiliate UBS Financial Services Inc. of Puerto Rico (UBS-PR) have been the largest target of these claims. In fact, the\u00a0TheStreet.com\u00a0reports that on November 2, UBS AG, the parent company of UBS and UBS-PR, notified the U. S. Securities and Exchange Commission in a filing that about $1.9 billion in Puerto Rico municipal bond funds and closed-end fund claims have been brought against it. The firm has already paid out $740 million to claimants.<\/p>\n