Former UBS Financial Services, Inc. and UBS Financial Services, Inc. Client Wins FINRA Arbitration for $19 Million

Posted on Thursday, October 25th, 2018 at 10:12 am    

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In October 2018, a former client of UBS Financial Services, Inc. and UBS Financial Services, Inc. of Puerto Rico won an award in a FINRA arbitration for compensatory damages for $14.9 million plus 5% post-award interest, as well as $3.9 million in attorney’s fees, $215,557 in costs, and the $750 filing fee for losses sustained from unsuitable investment in Puerto Rico bonds. The UBS financial advisor was David Lugo (CRD# 3109426).

Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.

The causes of action included breach of fiduciary duty; violation of industry rules; breach of contract; negligence; fraud; violation of Section 12(A) of Securities Act of 1933; false inducement to inaction; negligent supervision; and violation of Article 1802 of the Civil Code of Puerto Rico, 31 Laws of Puerto Rico Annotated [L.P.R.A.] §§5141, 3020 and 3021. The causes of action relate to the purchase of Puerto Rico municipal closed-end funds and Puerto Rico bonds, and the use of lines of credit as investment strategies in Claimants’ account. The FINRA arbitration hearing was conducted in Atlanta, Georgia.

Lugo has been the subject of 168 customer complaints between 2002 and 2018, according to his CRD report, most having to do with losses in connection with bonds, closed-end funds, and stocks and bonds tied to Puerto Rico municipal bonds ranging.

Some recent pending cases include:

September 2018. “Time frame: Unspecified Allegations: Claimants allege misrepresentations, unsuitability, and over-concentration concerning their investments in closed-end funds.” The customer is seeking $260,000 in damages and the case is currently pending.
September 2018. “Unspecified Allegations: Claimants allege misrepresentations, unsuitability, and over-concentration concerning their investments in closed-end funds.” The customer is seeking $934,404 in damages and the case is currently pending.

August 2018. “Time frame: Unspecified Allegations: Claimant alleges misrepresentations, unsuitability, and over concentration concerning her investments in closed-end bond funds and Puerto Rico bank stock.” The customer is seeking $315,000 in damages and the case is currently pending.

July 2018. “Time frame: Unspecified Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end bond funds.” The customer is seeking $75,000 in damages and the case is currently pending.

July 2018. “Time frame: Unspecified Claimants allege misrepresentations, unsuitability, and over-concentration concerning their investments in closed-end funds and Puerto Rico municipal bonds.” The customer is seeking $200,000 in damages and the case is currently pending.

June 2018. “Time frame: 2005 through Present Allegations: Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end bond funds and Puerto Rico municipal bonds.” The customer is seeking $1 million in damages and the case is currently pending.

June 2018. “Time frame: 2012 – present Allegations: Claimants allege their investments in UBS closed-end funds were unsuitable, over-concentrated, and misrepresented as safe investments.” The customer is seeking $363,063.26 in damages and the case is currently pending.

June 2018. “Time frame: Unspecified Allegations: Claimants allege misrepresentations, unsuitability, and over-concentration concerning their investments in closed-end funds.” The customer is seeking $1 million in damages and the case is currently pending.

May 2018. “Time frame: Unspecified Claimant alleges misrepresentations, unsuitability, and over concentration concerning his investments in closed-end bond funds and Puerto Rico municipal bonds.” The customer is seeking $800,000 in damages and the case is currently pending.

April 2018. “Time frame: Dates not specified. Claimant alleges that her investments in UBS Puerto Rico closed-end bond funds were unsuitable and over-concentrated. Claimant also alleges that the risks associated with the investments and alleged over-concentration were not disclosed.” The customer is seeking $257,282 in damages and the case is currently pending.

April 2018. “Time frame: Unspecified Claimants allege their investments in Puerto Rico closed-end funds were unsuitable, over-concentrated, and misrepresented as safe investments.” The customer is seeking $207,000 in damages and the case is currently pending.

April 2018. “Time frame: 2010-2013 Claimant’s Counsel alleges unsuitability, misrepresentation and over concentration in Puerto Rico municipal bonds and also alleges recommendation to hold.” The customer is seeking $5 million in damages and the case is currently pending.

February 2018. “Time frame: December 2012-Present Claimants allege their investment in proprietary closed-end funds and Puerto Rico bonds were unsuitable and overconcentrated. They further allege that these investments were misrepresented to them. Finally, they allege that the recommendation to hold the investments was unsuitable.” The customer is seeking $713,434.83 in damages and the case is currently pending.

February 2018. “Time frame: 2011 through present Claimant alleges misrepresentations, unsuitability, and over concentration concerning its investments in Puerto Rico municipal bonds.” The customer is seeking $1.5 million in damages and the case is currently pending.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, UBS Financial Services Inc. may be liable for investment or other losses suffered by Lugo’s customers.

Erez Law represents investors in the United States and Puerto Rico for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.