Erez Law and Aldarondo & Lopez Bras recently filed a claim against UBS Financial Services, Inc. and UBS Financial Services Inc. of Puerto Rico (“UBS”) on behalf of a 68-year-old widow, her 102-year-old mother, and her 59-year-old disabled sister-in-law. Aldarondo & Lopez Bras is a separate law firm only licensed to practice law in Puerto Rico. The women entrusted virtually all of their liquid assets to UBS, whose financial advisors recommended a dangerous and unsuitable concentration of high risk Puerto Rico debt and Puerto Rico-focused UBS bonds, according to the Statement of Claim. UBS and its financial advisors allegedly compounded the situation by recommending a margin loan for the widow. Collectively, the women lost more than $1 million.
UBS Puerto Rico was the primary underwriter of 23 CEFs with a total market capitalization of more than $5 billion. The UBS Family of Funds, included: Tax-Free Puerto Rico Fund, Inc.; Tax-Free Puerto Rico Fund II, Inc.; Tax-Free Puerto Rico Target Maturity Fund, Inc.; Puerto Rico AAA Portfolio Target Maturity Fund, Inc.; Puerto Rico AAA Portfolio Bond Fund, Inc.; Puerto Rico AAA Portfolio Bond Fund II, Inc.; Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc.; Puerto Rico Fixed Income Fund, Inc.; Puerto Rico Fixed Income Fund II, Inc.; Puerto Rico Fixed Income Fund III, Inc.; Puerto Rico Fixed Income Fund IV, Inc.; Puerto Rico Fixed Income Fund V, Inc.; and Puerto Rico Fixed Income Fund VI, Inc.
Given their advanced age and circumstances, the women generally are risk averse investors who were interested in generating income from their investments while preserving their principal, according to the Statement of Claim. They were in no position to jeopardize their savings and had no interest in speculation or high risk investments. Nevertheless, UBS and its financial advisors allegedly recommended that the women invest nearly all of the funds entrusted to UBS in UBS CEFs and direct investments in Puerto Rico debt. In addition, UBS’ financial advisor allegedly sold the widow’s Ginnie Mae asset backed securities to purchase Puerto Rico bonds with the proceeds without the widow’s required authorization. UBS’ financial advisor also allegedly recommended that the widow borrow money using margin, which only served to compound the level of risk to which the widow unknowingly was exposed.
The UBS Funds’ prices were relatively stable through the summer of 2013. Consequently, investors, including the women, generally had no appreciable losses and believed that the Funds were relatively safe investments. Consistent with UBS/UBS-PR’S position, UBS’ financial advisors repeatedly recommended that the women holding their Puerto Rico bonds and UBS Funds, accordingly to the Statement of Claim. In August and September 2013, the value of Puerto Rico bonds and the UBS Funds declined dramatically, and by February 2014, the ratings agencies had downgraded Puerto Rico’s debt to “junk” status or speculative (below investment grade). In all, the women lost more than $1 million of their irreplaceable savings.
Dozens of other investors have retained Erez Law and Aldarondo & Lopez Bras to pursue claims against the firms who sold the investments to them. While UBS dominates the island’s market through its UBS Family of Funds, some of which are co-managed with Popular Securities, Banco Santander (Santander Securities), Merrill Lynch, Raymond James, Oriental Bank and others also sold investments linked to Puerto Rico’s municipal debt. Claims for investment losses against UBS and other brokerage firms must be arbitrated through the Financial Industry Regulatory Authority (“FINRA”), the largest dispute resolution forum in the securities industry.
If you invested in UBS CEFS, were a client of UBS, or obtained a loan from UBS Bank, and have experienced financial losses, please call us at 888-840-1571 or complete our “contact form.” Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.
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