UBS Puerto Rico Bond Lawsuit Lawyer

UBS Puerto Rico Bond Fraud

UBS, through its affiliate UBS Financial Services Incorporated of Puerto Rico, recommended that many of its clients take concentrated positions in closed-end Puerto Rican municipal bond funds.

Because of UBS's unsuitable recommendations, many investors have lost their retirement savings and their homes. Recently, Levin Papantonio recevied the highest award ever given in the UBS Puerto Rico Bond Fraud litigation. The total arbitration award totaled $19 million. Read the story, at $19 Million Award.

In the following video, UBS Puerto Rico Bond Lawsuit Attorney Peter Mougey explains in detail the allegations in the lawsuit and how best to seek recovery and a settlement.

 
 

The Puerto Rican Municipal Bond Crisis

Puerto Rico's economy has been in a decline for years. In an effort to boost its economy, Puerto Rico and its agencies doubled their borrowing in the municipal bond market to $70 billion in a ten-year-period, as of 2013. UBS Puerto Rico helped to exacerbate the impending economic disaster by allowing investors to lose billions in UBS Puerto Rico municipal bond funds.

Specifically, UBS encouraged investors to over-concentrate in the high-risk, illiquid, closed-end municipal bonds of Puerto Rico without properly disclosing the risks of the investment or considering its suitability for the investors' actual goals. Many UBS clients were forced to liquidate their life savings to meet margin calls on the bonds. These victims have been left with nothing.

UBS Puerto Rico inappropriately recommended that investors concentrate their portfolios in closed-end Puerto Rican municipal bond funds. The closed-end funds were not diversified. The clients holding a high percentage of their liquid net worth in the closed-end funds and individual Puerto Rican bonds were exposed to too much risk.

UBS, as the investment advisor to many of the closed-end funds, purchased high-risk individual bonds on leverage of more than 50%. In comparison, many U.S. municipal bond funds are generally only leveraged at about 22%. Also, UBS's definition of 50% leverage is confusing at best. What it really means is that for every dollar held of investor assets, another dollar is invested with borrowed money.

For every dollar invested, another dollar is borrowed and two dollars is used to purchase bonds. As a result, 100% of the equity (the initial dollar) is leveraged. A 25% decline in the total investment is actually a 50% decline in the amount initially invested. This strategy dramatically increases risk.

UBS financial advisors also encouraged investors to buy bonds with lines of credit. In normal circumstances, if an investor buys securities on borrowed money, it is through a margin loan, which is regulated and limits the risk an investor can take. UBS financial advisors were incentivized to encourage lines of credit because they could receive a commission on the line of credit and the bonds purchased.

 
 

What UBS Puerto Rico Bonds are Involved

UBS Financial Services, Inc. of Puerto Rico has 5 branches and approximately 132 financial advisors. In 2013, UBS Puerto Rico reported significant financial losses across multiple, proprietary closed-end bond funds. It is alleged in the SEC complaint, filed in 2012, that UBS Puerto Rico made "serious misrepresentations and material omissions" about the liquidity and pricing of non-exchange traded, closed-end bonds.

UBS did settle with the SEC for $26 million in disgorgement and fines without admitting fault. However, a SEC administrative judge ruled that the SEC failed to prove that two high-ranking UBS PR executives committed fraud. It is important for UBS customers to understand that our cases are about suitability.

According to news sources like the Chicago Tribune, US authorities are probing UBS for criminal fraud for directing clients to use non-purpose loans instead of margin loans to buy the Puerto Rican bond funds that then plummeted in value.

More than $600 million in claims have already been filed against UBS by investors who lost their life savings. Almost anyone with investments in the municipal bond market has been affected in some way by the actions of UBS Puerto Rico. According to Morningstar Inc, 77 percent of municipal bond funds hold at least some Puerto Rican bonds.

UBS financial advisors often sold these leveraged bonds to retirees and conservative investors. Leveraged bonds are a very risky, volatile investment and are often not recommended to conservative investors.

However, UBS Puerto Rico frequently sold to conservative investors, and even encouraged retirees to borrow money in order to purchase these leveraged bonds. The following UBS Puerto Rico bond are under investigation:

  1. Puerto Rico AAA Portfolio Target Maturity Fund
  2. Puerto Rico GNMA US Government Target Maturity Fund
  3. Puerto Rico Fixed Income Fund
  4. Puerto Rico Fixed Income Fund II
  5. Puerto Rico Fixed Income Fund III
  6. Puerto Rico Fixed Income Fund IV
  7. Puerto Rico Fixed Income Fund V
  8. Tax-Free Puerto Rico Fund, Inc.
  9. Tax-Free Puerto Rico Fund II, Inc.
  10. Tax-Free Puerto Rico Target Maturity Fund, Inc.
  11. Tax Free Puerto Rico Fund
  12. Puerto Rico AAA Portfolio Bond Fund
  13. Puerto Rico AAA Portfolio Bond Fund II
  14. Multi-Select Securities Puerto Rico Fund
  15. Puerto Rico AAA Portfolio Target Maturity Fund, Inc.
  16. Puerto Rico AAA Portfolio Bond Fund
  17. Puerto Rico AAA Portfolio Bond Fund II
  18. Puerto Rico Fixed Income Fund
  19. Puerto Rico Fixed Income Fund II
  20. Puerto Rico Fixed Income Fund III
  21. Puerto Rico Fixed Income Fund IV
  22. Puerto Rico Fixed Income Fund V
  23. Puerto Rico Fixed Income Fund VI
  24. Puerto Rico GNMA & U.S. Government Target Maturity Fund
  25. Puerto Rico Investors Tax-Free Fund
  26. Puerto Rico Investors Tax-Free Fund II
  27. Puerto Rico Investors Tax-Free Fund III
  28. Puerto Rico Investors Tax-Free Fund IV
  29. Puerto Rico Investors Tax-Free Fund V
  30. Puerto Rico Investors Tax-Free Fund VI
  31. Puerto Rico Mortgage-Backed & U.S. Government Securities Fund
  32. Puerto Rico Short Term Investment Fund
  33. Tax-Free Puerto Rico Fund
  34. Tax-Free Puerto Rico Fund II
  35. Tax-Free Puerto Rico Target Maturity Fund

 

Contact Information

To contact us for a free confidential consult, you can call us at (850) 435-7000 (Pensacola) or (800) 277-1193 (toll free).

You also can request a free private and confidential evaluation by clicking UBS Puerto Rico Bond Fraud Evaluation Form, and your inquiry will be immediately reviewed by one of our attorneys who handles your specific type case.