Recording Indicates UBS Puerto Rico Forced the Firm’s Brokers to Sell the Firm’s Puerto Rican Bond Funds
Way back in the spring of 2011 and two years before the controversial products blew up, the UBS Puerto Rico proprietary closed-end bond funds appeared to be such risky investments to the firm’s brokers they wanted to stop offering them to their clients. The brokers’ doubts became so great that when questioned by the firm why they weren’t pushing to funds, a group of UBS Puerto Rico brokers came up with a list of twenty-two reasons why. The concerns, based largely on their own views and feedback from their clients, included allegations the funds suffered from low liquidity, excessive leverage, oversupply and volatility. Much of the doubt centered on the fact many of the funds were chock full of Puerto Rican government and other related entities’ debt that was underwritten by UBS.
A recording of a meeting with the UBS brokers and Miguel Ferrer, then chairman of UBS Financial Services Inc of Puerto Rico, asks why the brokers were no longer pushing the funds and that reveals they had to change their mindset or leave. Ferrer can be heard saying in Spanish the brokers need to focus on the attractive benefits of the fund and stop complaining there are no products available to sell. He also stressed the brokers collectively had nearly a billion dollars sitting in cash that needed to be invested to generate commission income.
The recording could help to bolster the hundred of arbitration claims filed with the Financial Industry Regulatory Authority (FINRA) by hundreds of investors seeking more than $900 million in damages from UBS for the losses associated with the failed bond funds. The claims are based on allegations UBS Puerto Rico emphasized the proprietary funds’ high yields and tax benefits, but did not tell clients about the risky nature and illiquidity of the investments.
A spokeswoman for UBS said the firm believed the funds were a sound investment that had provided investors strong returns in the past as well as tax benefits. However, some of the funds lost half to nearly two-thirds of their value between March 2011 and October 2013, and have failed to recover since. UBS declined to comment on the pending arbitration litigation.
The experience securities fraud attorneys at Colling Gilbert Wright & Carter are currently investigating and filing FINRA arbitration claims on behalf of individual investors who have lost money investing in UBS Puerto Rico Closed-End Bond Funds. If you have lost money in any of the UBS proprietary closed-end bond funds. Please contact our office for free case evaluation.