UBS Puerto Rico Bond Fund Fraud
Investigating UBS Puerto Rico Bond Fund Fraud
Zamansky LLC is a premier investment and securities fraud law firm investigating financial losses stemming from UBS Puerto Rico bonds and bond funds that were sold to investors as conservative, safe, low-risk investments. This investigation involves both the wrongful sales practices of UBS Financial Services Inc. of Puerto Rico (UBS Puerto Rico) and its financial advisors. Our firm has affiliated with the experienced law firm of Maria Elsie López Adames to reach the hundreds of Puerto Ricans who have sustained significant losses from unsuitable investment recommendations and misrepresentations in the sale of bond funds.
UBS Puerto Rico Bonds
UBS Puerto Rico operates five branch offices with approximately 132 financial advisors. Our firm’s investigation concerns both the sales practices of the advisors and the sale of proprietary municipal and leveraged UBS Puerto Rico bond funds. UBS Puerto Rico funds were comprised of Puerto Rico bonds which had been downgraded to near “junk” status. Numerous clients have told our firm that their financial advisors failed to explain the risks associated with investing in these funds and promoted the funds as safe and secure investments, suitable for retirees and other conservative investors.
In recent months, the value of bonds issued by the Commonwealth of Puerto Rico has experienced a steep decline. A shrinking economy, including an unemployment rate nearly twice the national average, has driven down the credit ratings of these bonds to near-junk levels. This sharp drop in value has caused many bond holders to sell off their bonds, resulting in an even worse market for these securities. Unfortunately, according to Reuters , local institutions and individuals located in Puerto Rico own an estimated 30 percent of the $70 billion in outstanding bonds. Moreover, an astoundingly large number of bond funds include exposure to Puerto Rico bonds, including funds managed by UBS, Merrill Lynch, Oppenheimer Funds, Wells Fargo, and other companies.
Puerto Rico is an unincorporated commonwealth, and not a typical American state or municipality. This status means that any income from its bonds is tax-exempt. The annual yields on these bonds have traditionally been as high as 10 percent. These bonds have generated very appealing returns for many financial advisors and asset managers because they lead to greater fees, even when they are actually too risky for most customers.
With the downgrade of these bonds, investors may be left holding the bag. Investors have already taken a big hit: indexes that track Puerto Rico bonds are down more than 18 percent this year.
Taking Action Against UBS Puerto Rico
Our investigation has uncovered that UBS Puerto Rico loaded funds from investors into highly leveraged bond funds. UBS also urged the company’s financial advisors to recommend that their investors borrow even more money to invest in these risky funds. Leveraged bond funds are not appropriate investments for conservative or even moderate investors. Any leveraged bond, whether it holds stocks, bonds or some other form of investment, is highly volatile. Financial advisors are required to fully advise investors of such risks. Additionally, it is inappropriate for financial advisors to encourage borrowing on margin or through a line of credit to purchase a leveraged fund.
Zamansky LLC is actively filing FINRA arbitration cases on behalf of investors who have lost money stemming from investments in the UBS Puerto Rico bond funds. FINRA, the Financial Industry Regulatory Authority , is the largest independent regulator for securities firms doing business in the United States. The authority’s mission is to protect investors and market integrity thorough effective and efficient regulation of the United States securities industry.
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