In May 2018, a former client of UBS Financial Services Inc. and UBS Financial Services Inc. of Puerto Rico won an award in a FINRA arbitration for compensatory damages for $465,000, plus $23,000 in witness fees, $120,900 in attorney fees, and a $600 filing fee for losses sustained from losses sustained from unsuitable investments in Puerto Rico bonds. The investors were clients of UBS Financial Services Inc. financial advisor David Lugo (CRD# 3109426).
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.
To make matters worse, after Hurricane Maria devastated the island in September 2017, Puerto Rico debt fell by 4%, the biggest weekly drop since July 2015. This sharp fall came after Governor Alejandro García Padilla announced that Puerto Rico would ask bondholders to take less than what they were owed.
The causes of action included violation of the Puerto Rico Uniform Securities Act (10 L.P.R.A. § 890), securities fraud, common law fraud, and constructive fraud (“Count 1”); securities recommended and purchased were unsuitable for Claimants (“Count 2”); breach of fiduciary duty (“Count 3”); negligence and negligent supervision (“Count 4”); breach of contract (“Count 5”); rescission of the purchase of closed-end mutual funds (“CEFs”) (“Count 6”); Respondents’ liability for the actions of their representatives (“Count 7”). The causes of action relate to Claimants’ investments in CEFs concentrated in Puerto Rico bonds and the use of loan proceeds to purchase securities. The FINRA arbitration hearing was conducted in San Juan, Puerto Rico.
Lugo has been the subject of 168 customer complaints between 2002 and 2018, according to his CRD report, most having to do with losses in connection with bonds, closed-end funds, and stocks and bonds tied to Puerto Rico municipal bonds ranging.
Some recent pending cases include:
- May 2018. “Time frame: Unspecified Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end bond funds and Puerto Rico municipal bonds.” The customer is seeking $800,000 in damages and the case is currently pending.
- April 2018. “Time frame: Dates not specified. Claimant alleges that her investments in UBS Puerto Rico closed-end bond funds were unsuitable and over-concentrated. Claimant also alleges that the risks associated with the investments and alleged over-concentration were not disclosed.” The customer is seeking $257,282 in damages and the case is currently pending.
- April 2018. “Time frame: Unspecified Claimants allege their investments in Puerto Rico closed-end funds were unsuitable, over-concentrated, and misrepresented as safe investments.” The customer is seeking $207,000 in damages and the case is currently pending.
- April 2018. “Time frame: 2010-2013 Claimant’s Counsel alleges unsuitability, misrepresentation and over concentration in Puerto Rico municipal bonds and also alleges recommendation to hold.” The customer is seeking $5 million in damages and the case is currently pending.
- February 2018. “Time frame: December 2012-Present Claimants allege their investment in proprietary closed-end funds and Puerto Rico bonds were unsuitable and overconcentrated. They further allege that these investments were misrepresented to them. Finally, they allege that the recommendation to hold the investments was unsuitable.” The customer is seeking $713,434.83 in damages and the case is currently pending.
- February 2018. “Time frame: 2011 through present Claimant alleges misrepresentations, unsuitability, and over concentration concerning its investments in Puerto Rico municipal bonds.” The customer is seeking $1.5 million in damages and the case is currently pending.
- December 2017. “Time frame: Unknown — Present Claimants allege their investments in Puerto Rico closed-end funds were unsuitable, over concentrated, and misrepresented as safe investments.” The customer is seeking $700,000 in damages and the case is currently pending.
- November 2017. “Time frame: 2012-2015 Claimant’s Counsel alleges unsuitability, misrepresentation and over concentration in Puerto Rico municipal bonds and also alleges recommendation to hold.” The customer is seeking $20 million in damages and the case is currently pending.
- November 2017. “Time frame: Unspecified Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in closed-end funds and other Puerto Rico securities.” The customer is seeking $5.7 million in damages and the case is currently pending.
- November 2017. “Time frame: unspecified Allegations: Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in closed-end funds and Puerto Rico municipal bonds.” The customer is seeking $6 million in damages and the case is currently pending.
- September 2017. “Time frame: 2013-present Claimants allege their investments in Puerto Rico closed-end funds and municipal bonds were unsuitable, over concentrated, and misrepresented as safe investments.” The customer is seeking $969,626 in damages and the case is currently pending.
- August 2017. “Time frame: 2012-2015 Claimants allege unsuitability, misrepresentations, and over-concentration concerning their investments in Puerto Rican municipal bonds.” The customer is seeking $90 million in damages and the case is currently pending.
- June 2017. “Time frame: unspecified Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in Puerto Rico municipal bonds.” The customer is seeking $1.5 million in damages and the case is currently pending.
- June 2017. “Time frame: unspecified Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in closed-end funds and Puerto Rico municipal bonds.” The customer is seeking $1.7 million in damages and the case is currently pending.
- May 2017. “Time frame? Not stated Claimant’s Counsel alleges misrepresentations and unsuitable recommendations resulting in the overconcentration of the clients accounts in CEFs.”
The customer is seeking $15 million in damages and the case is currently pending. - January 2017. “Time frame: unspecified Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end funds and Puerto Rico municipal bonds.” The customer is seeking $8.5 million in damages and the case is currently pending.
- April 2016. “Time frame: unspecified Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in closed-end funds.” The customer sought $1 million in damages and the case was settled for $1.275 million.
- February 2016. “Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end funds and Puerto Rico municipal bonds. Time frame: unspecified.” The customer is seeking $3,038,418.82 in damages and the case is currently pending.
- September 2015. “Time frame: unspecified Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in closed-end funds.” The customer is seeking $2,257,543.55 in damages and the case is currently pending.
- September 2015. “Time frame: 2006-2015. Claimants allege misrepresentations, unsuitability, and over concentration concerning their investments in Puerto Rico municipal bonds and closed-end bond funds.” The customer is seeking $3,265,000 in damages and the case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, UBS Financial Services Inc. may be liable for investment or other losses suffered by Lugo’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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