Securities Lawyers Blog
On October 9, 2014, Puerto Rico’s Office of the Commissioner of Financial Institutions (OCFI) has settled its claims with UBS Financial Services Incorporated of Puerto Rico (UBS Puerto Rico) over UBS’s sale of closed-end mutual funds in Puerto Rico. The OCFI conducted a routine examination from October 15, 2013 through June 27, 2014. The examination of UBS Puerto Rico was conducted to determine if the firm complied with the Puerto Rico Uniform Securities ACT Regulation No. 6078.
The OCFI interviewed a sample of clients and examined whether certain former and current UBS Puerto Rico brokers either (i) recommended that, or (ii) permitted certain clients to, use non-purpose loans through UBS Bank USA to purchase securities in UBS brokerage accounts during the 2011-2013 period in violation of the customers’ loan agreements and UBS Puerto Rico policies.
The OCFI determined that for some clients, such a practice was unsuitable based on the customers’ financial objectives, risk tolerance and needs, and that UBS Puerto Rico brokers may have induced clients through the misrepresentations or omissions of material facts.
As a part of the settlement, UBS Puerto Rico did not admit to liability. However UBS Puerto Rico and the OCFI agreed that UBS Puerto Rico agreed to the payment and restitution of $1,681,556 to certain clients outlined in the settlement and that UBS Puerto Rico would pay $3,500,000 to the Investor Education and Investigation Fund. Within six months of the settlement agreement, UBS Puerto Rico is also required to conduct a good faith review of customer accounts held with UBS Puerto Rico to determine if additional restitution is necessary. In addition, UBS Puerto Rico has agreed to place certain brokers under enhanced supervision.
“This settlement is only the beginning,” said Adam Gana, managing partner of Gana Weinstein LLP, “UBS now has to diligently put brokers on heightened supervision and also make additional restitution to clients that fit certain criteria.”
Currently there are two class actions and over 400 individual arbitrations complaints filed against UBS and UBS Puerto Rico for the sale of 23 closed-end proprietary bond funds. If you or someone you know invested in any of the UBS closed-end funds you should contact Gana Weinstein LLP. The list of closed-end bond funds can be found here. Our law firm represents a number of investors in their actions against UBS and UBS Puerto Rico. To contact us, you can email Adam Gana at agana@ganallp.com or call us at 212-776-4251.