UBS Puerto Rico operates 23 proprietary non-exchange-traded closed-end funds (UBS Funds). UBS is one of the key players in the Puerto Rico municipal debt market and has packaged and sold approximately $10 billion in municipal debt through the UBS Funds.
It has been alleged that UBS marketed the UBS Funds to customers as income producing municipal bond funds that were designed to preserve investor principal. Over a number of years, UBS allegedly had its advisors over-concentrate thousands of its Puerto Rican clients in the UBS Funds. However, at the same time that UBS recommended the UBS Funds to clients, UBS allegedly liquidated its own UBS Fund assets due to the firm’s internal analysis that found that the Funds contained excessive risks.
Over the summer of 2013, the market for Puerto Rico’s $70 billion municipal debt began to evaporate. As the value of the UBS Funds has plummeted by 50-60% in value in a matter of months investor complaints filed with the Financial Industry Regulatory Authority Inc. (FINRA) have increased.