UBS Wealth Management and its Puerto Rico unit have been ordered to pay an investor $1 million in damages after an Financial Industry Regulatory Authority (FINRA) arbitration panel found UBS registered representative encouraged the Claimant to invest 100% of his portfolio in risky, UBS proprietary closed-end bond funds. Juan Burgos Rosado, a 66-year old "quintessential conservative investor," according to the panel, lost $737,000 of his nearly $1 million portfolio when the value of UBS' Puerto Rico municipal bond funds collapsed in the fall of 2013. The panel said the "Claimant's lifetime pattern has been one of frugality, saving and employment of resulting capital and his own labor in business opportunities that he understands can earn a good return," the panel wrote. "This account was extremely over-concentrated and clearly unsuitable for claimant."
The FINRA award includes $600,000 in compensatory damages and an order that UBS must also pay roughly $400,000 to repurchase Mr. Rosado's portfolio also known as rescission. The panel did stop short of granting the $1 million in punitive damages requested in the Statement of Claim. A UBS spokesman said the firm was "disappointed" with the decision and disagrees with the award.
The decision comes as awards related to the Puerto Rico bond funds begin to trickle in. More than $1.1 billion in damages have been alleged so far, according to disclosures in UBS' quarterly reports. According to marketing materials, UBS PR sold more than $10 billion of the funds through 2012. This is the second significant investor award in the past week. Last week, another FINRA panel ordered UBS to pay $200,000 to an investor who the firm claimed only had $8,000 in out of pocket losses, according to the attorney in the case, W. Scott Greco. The client had asked for between $400,000 in damages, according to the award.
UBS PR is hoping that these investor awards do not signal a trend. I n that regard, the UBS spokesman said the firm did not expect that this most recent award would be "indicative of how other panels may rule." Although Arbitration awards do not set legal precedent, the attorney representing the Claimant, and who is representing around 150 investors in similar claims, feels this damage award would apply to many of other similarly situated investors.
The experienced securities fraud attorneys at Collng Gilbert Wright & Carter have successfully represented hundreds of investors who purchased proprietary income funds that were represented as safe and appropriate for conservative income investors. We are currently investigating and filling claims on behalf of dozens of Puerto Rican residents who purchased the proprietary UBS Closed-End Bond Funds. If you have suffered losses as a result of omissions or misrepresentations during the sale of these funds, please contact us for a free case evaluation.