Erez Law and Aldarondo & Lopez Bras File Claim Against UBS for Elderly Couple With $850,000 Losses Related to UBS Funds and Puerto Rico Bonds

Erez Law and Aldarondo & Lopez Bras recently filed a claim against UBS Financial Services, Inc. and UBS Financial Services Inc. of Puerto Rico (“UBS”) on behalf of a 63-year-old man and his 62-year-old wife for more than $850,000 in losses related to UBS/UBS-PR branded Puerto Rico Funds and Puerto Rico bonds. Aldarondo & Lopez Bras is a separate law firm only licensed to practice law in Puerto Rico.

The couple, who has been married for 41 years, entrusted UBS with the vast majority of their retirement savings and securities holdings. The couple allegedly told UBS that they wanted to generate income from their irreplaceable retirement savings, without subjecting the savings to undue risk. They had no interest in high risk or leveraged investment strategies, according to the Statement of Claim.

Despite the couple’s express risk aversion, UBS allegedly recommended that the couple concentrate their irreplaceable retirement savings in unsuitable and high risk Puerto Rico focused UBS Funds and Puerto Rico bonds. UBS allegedly told the couple that the UBS Funds were liquid and safe investments, and reassured the couple that their principal always would be secure. In fact, the UBS Funds were high risk, leveraged investments.

Regrettably, UBS’ representations were untrue, according to the Statement of clam. The distributions paid by the UBS Funds are tax-free, and only Puerto Rico residents may purchase the Puerto-Rico focused UBS Funds, which creates a very limited amount of qualified buyers for the Funds. As a result, the illiquidity risk of the UBS Funds was inherently high at all times. Further, the UBS CEFs recommended to the couple are leveraged funds which generally may borrow up to 100% of their equity. That is, the UBS CEFs are permitted to hold $2 of securities for every $1 of capital invested in the funds. This leverage magnifies the risk of the UBS Funds. UBS and its financial advisor failed to explain these and other significant risks to the couple, according to the Statement of Claim.

The UBS Funds’ prices were relatively stable through the summer of 2013. Consequently, investors, including the couple, generally had no appreciable losses and believed that the Funds were relatively safe investments. The value of the UBS Funds drastically declined in August and September 2013, however, and by February 2014, the ratings agencies had downgraded Puerto Rico’s debt to “junk” status or speculative (below investment grade). When the value of their accounts dramatically declined, the couple discussed the situation with their UBS brokers, who allegedly recommended the couple continue holding the UBS Funds and Puerto Rico bonds. As a result, the couple sustained losses of approximately $850,000 in their accounts.

Dozens of other investors have retained Erez Law and Aldarondo & Lopez Bras to pursue claims against the firms who sold the investments to them. While UBS dominates the island’s market through its UBS Family of Funds, some of which are co-managed with Popular Securities, Banco Santander (Santander Securities), Merrill Lynch, Raymond James, Oriental Bank and others also sold investments linked to Puerto Rico’s municipal debt. Claims for investment losses against UBS and other brokerage firms must be arbitrated through the Financial Industry Regulatory Authority (“FINRA”), the largest dispute resolution forum in the securities industry.

If you invested in UBS CEFS, were a client of UBS, or obtained a loan from UBS Bank, and have experienced financial losses, please call us at 888-840-1571 or complete our “contact form“. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.