Lawyers: UBS hit with $18M FINRA arbitration verdict
UBS Financial Services Inc. and UBS Financial Services Inc. of Puerto Rico were slammed with an $18 million arbitration verdict by the Financial Industry Regulatory Authority released Monday, legal firm Sonn and Erez PLC confirmed in a statement.
The FINRA award included approximately $12.7 million in compensatory damages, $2.5 million in interest, $3.18 million in attorney fees, and $163,000 in expert costs.
The arbitration centered on the sale of Puerto Rico Municipal Bonds and Puerto Rico closed-end funds that owned Puerto Rico municipal bonds on margin.
“This verdict supports our theory that UBS oversold Puerto Rico bonds and closed end funds to their customers, in concentrated amounts, like many other brokerage firms in Puerto Rico,” said Jeffrey Sonn of Sonn & Erez, PLC, whose law firm was not involved in the verdict, but who represent more than 200 Puerto Rico investors with similar claims.
“Our firm has already won two large Puerto Rico arbitration awards against UBS, and resolved many, many other claims similar to today’s verdict,” added Sonn.
“Brokerage firms in Puerto Rico, like UBS, in our opinion, placed too much emphasis on the triple tax free benefits of the Puerto Rico muni bonds and closed end funds, and failed to properly supervise the concentration in customer accounts, which left many customers with a majority, and in some cases, all of their money invested in just Puerto Rico muni bonds and proprietary closed end bond funds,” said Jeff Erez, of Sonn and Erez.
In 2015, FINRA fined UBS $18.5 million finding that “UBS Puerto Rico failed to monitor the combination of leverage and concentration levels in customer accounts to ensure that the transactions were suitable given the customers’ risk objectives and profiles,” according to FINRA.
Sonn and Erez, along with the Puerto Rico-based law firm of Aldarondo & Lopez Bras, represent more than 200 customers that have significant losses in Puerto Rico muni bonds and proprietary closed end bond funds.
UBS Puerto Rico bond funds include:
- Tax-Free Puerto Rico Fund I-II,
- Tax-Free Puerto Rico Target Maturity Fund,
- Puerto Rico AAA Portfolio Target Maturity Fund,
- Puerto Rico AAA Portfolio Bond Fund I-II,
- Puerto Rico GNMA & U.S. Government Target Maturity Fund,
- Puerto Rico Mortgage-Backed & U.S. Government Securities Fund,
- Puerto Rico Fixed Income Fund I-VI,
- Puerto Rico Investors Tax-Free Fund I-VI,
- Puerto Rico Tax-Free Target Maturity Fund I-II,
- Puerto Rico Investors Bond Fund.