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Erez Law and Aldarondo & Lopez Bras File Claim Against UBS for Elderly Brothers with More than $200,000 in Losses Related to Puerto Rico Bonds and UBS Funds

Posted on Monday, October 20th, 2014 at 8:41 am    

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 three elderly brothers who suffered more than $200,000 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 brothers entrusted their inheritance and retirement savings to UBS, whose financial advisor recommended a dangerous and unsuitable concentration in high risk UBS/UBS-PR branded Puerto Rico Funds and Puerto Rico bonds, according to the Statement of Claim.

The three brothers were conservative investors and had no interest in high risk or speculative investments. Ages 55, 60, and 63, the brothers inherited the assets in their father’s UBS account, and their UBS financial advisor allegedly recommended that they maintain positions in UBS Funds and Puerto Rico bonds. The youngest brother is disabled and needed to use his investments to supplement his disability income and meet daily living expenses. In addition, the 60-year-old brother entrusted UBS with his irreplaceable retirement savings. UBS and its financial advisor allegedly lead the brothers to believe that their portfolio consisted of safe and secure investments that would preserve their principal. In fact, their portfolio lacked any material diversification, and exposed them to a high degree of undisclosed risk, according to the Statement of Claim.

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 brothers, according to the Statement of Claim.

The UBS Funds’ prices were relatively stable through the summer of 2013. Consequently, investors, including the elderly brothers, generally had no appreciable losses and believed that the Funds were relatively safe investments. UBS and its financial advisor allegedly repeatedly recommended that the brothers maintain their positions in the UBS Funds and Puerto Rico bonds. In August and September 2013, the value of the UBS Funds declined dramatically, and by February 2014, the ratings agencies had downgraded Puerto Rico’s debt to “junk” status or speculative (below investment grade). The brothers allegedly told their UBS financial advisor to sell whatever he could, and by January 2014, the brothers had realized more than $200,000 in investment losses.

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.