BankingFinancial District

UBS looks to clear the air with clients after SEC decision

About a year ago, UBS Puerto Rico agreed to settle the SEC’s charges by paying $26.6 million. (Credit: © Mauricio Pascual) About a year ago, UBS Puerto Rico agreed to settle the SEC’s charges by paying $26.6 million. (Credit: © Mauricio Pascual)

A day after the Securities and Exchange Commission absolved two of its top Puerto Rico financial advisors of charges of misleading or defrauding customers, UBS Financial Services looked to clear the air with its client base through an extensive letter in which it addressed a number of public allegations regarding its recent business practices.

In the document, UBS Puerto Rico CEO Carlos V. Ubiñas discussed the matter of the company’s alleged decision to take out non-purpose loans to buy closed-end funds, or any other security, saying doing so is a violation of UBS’s policies. Furthermore, he also rejected reports that UBS did not have the authority to extend credit lines to Puerto Rico residents.

“We are not required to be licensed as a bank under Puerto Rico law. UBS clients in any U.S. state or Puerto Rico are eligible to apply for credit lines from our Utah-based UBS Bank USA. Our financial advisors here in Puerto Rico can make clients aware of the availability of loans and credit lines; however, all decisions related to loans and credits are made by UBS Bank USA employees based in New Jersey or Utah. No Puerto Rico employees are involved in the credit-decision process,” Ubiñas said.

Additionally, he also cast off claims that Puerto Rico bonds and closed-end funds were not appropriate investments for certain investors or that clients did not realize how heavily the funds were invested in Puerto Rico securities.

“Puerto Rico municipal bonds have funded our island’s schools, hospitals and public works and, thereby, helped improve the lives of all Puerto Ricans. These securities provided excellent returns and tax-exempt or tax advantaged income for almost two decades, and are an important part of many clients’ portfolios and investment objectives,” he said.

“Additionally, it is worth noting that in the case of the funds, they are required by law to maintain certain minimum investments in Puerto Rico securities, typically no less than 67 percent of their total assets,” Ubiñas noted. “Finally, as with any investment, there are risks associated with these securities — risks that we have consistently communicated in prospectuses, quarterly and annual reports, as well as in the conversations our financial advisors have with their clients.”

Carlos V. Ubiñas, CEO of UBS Financial Services Incorporated of Puerto Rico. Carlos V. Ubiñas, CEO of UBS Financial Services Incorporated of Puerto Rico.

The letter Ubiñas sent Wednesday, of which this media outlet obtained a copy, came in the wake of the SEC’s decision to exonerate Miguel A. Ferrer, the firm’s former CEO, and Carlos J. Ortíz, managing director of Capital Markets, from claims that they made misrepresentations and omitted material information about closed-end funds whose shares were issued and sold to investors by UBS Financial Services.

‘Not one bit of evidence’
The decision came after 13 days of hearings and evidence gathering, which impelled Brenda P. Murray, the SEC’s chief administrative law judge, to conclude, among other things, that the claims against the financial advisors involved “a serious difference of opinion about the level of information required to be provided to investors about a policy decision by the parent company,” and hinged on “whether Ferrer’s and Ortiz’s actions in response to that policy decision violated the antifraud provisions of the securities statutes.”

In the 95-page document, Murray concluded that “there is not one bit of evidence that UBS PR, Ferrer, and Ortiz engaged in a course of conduct to mislead or a scheme to mislead investors by hiding or disguising the fact that UBS PR was in a period when it was not buying fund shares and was reducing fund share prices.”

Upon the dismissal of the case, UBS issued a brief statement saying it was pleased with the decision that related to “a period of significant turmoil in the global financial markets between 2008 and 2009.”

“As the firm has maintained since first disclosing this investigation in 2010, the allegations against Ferrer and Ortiz were meritless, and the judge’s decision confirms our position,” the company said.

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