UBS Ordered to Pay $2.9 Million to Puerto Rico Bond Fund Holders

  • UBS says investors filed more than $1.1 billion of claims
  • Investors allege unsuitibility of closed-end bond funds

UBS AG was ordered to pay about $2.9 million to two investors in Puerto Rico closed-end municipal bond funds, according to an arbitration award posted on the Financial Industry Regulatory Authority’s website.

Ana Teresa Lopez-Gonzalez and Andres Ricardo Gomez were part of a group of investors who filed a $10 million claim against UBS Financial Services Inc. of Puerto Rico in 2013, asserting unsuitability and misrepresentations regarding UBSPR’s closed-end funds. The other investors settled their claims with UBS before an August hearing. Lopez-Gonzalez and Gomez received about $2.4 million in damages and about $480,000 for attorney’s fees, according to a FINRA filing.

Investors in UBS’s Puerto Rico closed-end funds have filed more than $1.1 billion of claims, the Zurich-based bank said in a July 28 filing. Investors have alleged that UBS steered customers into risky funds that invested mostly in securities issued by Puerto Rico. The value of the investments plummeted as Puerto Rico’s fiscal crisis worsened. Some investors also accused UBS advisers of offering loans to invest in the funds and manipulating a secondary-market for their shares.

“UBS is disappointed with the decision to award any damages, with which we respectfully disagree,” according to statement Tuesday. “UBS notes that the decision in this case was based on the facts and circumstances particular to these individual claimants, and is not indicative of how other panels may rule with regard to other customers who invested in similar products.”

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