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Erez Law and Aldarondo & Lopez Bras File Claim Against UBS for Doctor’s Estate With More than $295,000 in Losses Related to Puerto Rico Bonds and UBS Funds

Posted on Saturday, November 15th, 2014 at 1:58 pm    

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 doctor’s estate for more than $295,000 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 retired doctor passed away in April 2014 at age 86, and left his estate to his widow and two children. Prior to this, the elderly doctor was a long-time customer of UBS and its financial advisor, to whom he entrusted virtually all of his retirement savings. In so doing, the doctor allegedly told UBS and its financial advisor that he was interested in generating income to meet his expenses, including his medical expenses, and was in no position to jeopardize his retirement savings.

The elderly doctor had no interest in speculation or high risk investments or strategies, according to the Statement of Claim. The doctor allegedly told his financial advisor that the funds in his account were his life savings and that he needed to remain in “safe, very conservative investments.” Nevertheless, UBS and its financial advisor recommended that the doctor invest the vast majority of his retirement savings in high risk and unsuitable Closed End Funds (“CEFs”) that invested in Puerto Rico bonds as well as direct investments in Puerto Rico bonds, according to the Statement of Claim.

UBS-PR was the primary underwriter of 23 CEFs with a total market capitalization of over $5 billion. 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 o f the UBS Funds was inherently high at all times. Further, the UBS CEFs recommended to the brothers 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 elderly doctor, according to the Statement of Claim.

The UBS Funds’ prices were relatively stable through the summer of 2013. Consequently, investors, including the elderly doctor, generally had no appreciable losses and believed that the Funds were relatively safe investments. As the Funds declined in value in the Summer and Fall of 2013, the doctor’s wife called the UBS financial advisor on her husband’s behalf to raise concerns over the declining values in his account. The financial advisor allegedly assured the doctor’s wife that the fluctuations were normal and the value would go back up. By February 2014, however, the ratings agencies had downgraded Puerto Rico’s debt to “junk” status or speculative (below investment grade). As of the end of January 2014, the elderly doctor had in excess of $14,000 in losses in his UBS Funds, and more than $281,000 in losses in his Puerto Rico bonds.

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.