UBS Financial Services Inc. Financial Advisor José Gabriel Ramirez-Arone Jr. Guilty of More than $1 Million in Improperly Generated Commissions

Posted on Monday, November 19th, 2018 at 1:13 pm    

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UBS Financial Services Inc. financial advisor José Gabriel Ramirez-Arone Jr. (CRD# 1519748) pleads guilty to fraudulently obtain and misuse non-purpose credit lines for purchasing securities, resulting in $1,225,500 in improperly generated commissions. Ramirez was registered with UBS Financial Services Inc. in Guaynabo, Puerto Rico and UBS Financial Services Incorporated of Puerto Rico in San Juan, Puerto Rico from 1997 to 2014, when he was terminated regarding, “Mr. Ramirez’s employment was terminated when the firm learned that he (1) had permitted, and in some cases encouraged, certain clients to reinvest non-purpose loan proceeds into closed end funds in violation of firm policy and the clients’ loan agreements and (2) provided misleading responses to branch management when asked about certain account activity.”

In November 2018, the United States Department of Justice announced that Ramirez pled guilty to fraudulently obtain and misuse non-purpose credit lines for purchasing securities, resulting in $1,225,500 in improperly generated commissions. Ramirez pleaded guilty to one count of bank fraud and admitted that he participated in a scheme in which various of his clients at UBS-PR fraudulently obtained non-purpose credit lines offered by UBS Bank USA, a Utah-based subsidiary of UBS Financial Services, Inc. Non-purpose lines of credit are credit lines for which purchasing securities and it was expressly prohibited by an internal UBS-PR policy. According to the announcement, Ramirez knew that his clients then misused them by drawing funds from the credit lines for purchasing securities, which directly violated the credit lines’ terms of use.

According to the announcement, “Ramirez-Arone further admitted that the scheme took advantage of the low interest rate of UBS-UT’s non-purpose credit lines, and the payout interest rate of closed-end funds (CEFs) offered by UBS-PR, which were mainly comprised of Puerto Rican bonds. Ramirez-Arone admitted that the CEFs had a payout interest rate exceeding the low interest rate of the non-purpose credit lines. To capitalize on the difference between the low and high interest rates by engaging in arbitrage, Ramirez-Arone advised various clients that they could draw funds from a UBS-UT non-purpose credit line and invest the funds in a UBS-PR CEF.”

Additionally, Ramirez admitted that he advised clients to obtain a UBS-UT non-purpose credit line by misrepresenting in a credit line application the proposed reason for needing the credit line, which was an important piece of information for UBS-UT. “He further admitted that he advised clients—after the credit line was issued—to transfer UBS-UT non-purpose credit line funds to a third-party bank (i.e., outside of the UBS banking system), before transferring the same funds back into the UBS banking system to UBS-PR for investment in a CEF. This practice diminished UBS-UT’s ability to recognize that funds originating from a UBS-UT non-purpose credit line were later being invested in a UBS-PR CEF.”

In August 2014, FINRA barred Ramirez after he failed to respond to finra request for information.

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.

Ramirez has been the subject of 74 customer complaints between 2012 and 2018, four of which were denied and two were closed without action, according to his CRD report. A highlight of complaints include:

October 2018. “Time frame: 2012 – present Allegations: Claimants allege their investments in Puerto Rico closed-end funds and municipal bonds were unsuitable, over concentrated, and misrepresented as safe investments.” The customer is seeking $160,000 in damages and the case is currently pending.

August 2018. “Time frame: Unspecified Claimant, as one of the heirs to her husband’s estate, alleges that her funds were invested in unsuitable Puerto Rico closed-end funds and PR bonds. Claimant also alleges that her investments were misrepresented as safe and low-risk and that the leverage, liquidity risks, and geographic concentration of the closed-end funds were not disclosed.” The case is currently pending.

December 2015. “Time Frame: not stated Claimant alleges unsuitability, overconcentration, and misrepresentations involving the recommendation of a Puerto Rico closed-end funds.” The customer sought $9 million in damages and the case was settled for $1,750,000.

October 2015. “Time frame? 2009 – 2015 Claimant alleges unsuitability, overconcentration, and misrepresentations involving the recommendation of a Puerto Rico closed-end funds.” The customer is seeking $1,589,433.51 in damages and the case is currently pending.

August 2015. “Claimant alleges unsuitability, overconcentration and misrepresentations involving the recommendation of closed-end funds. Time frame: not stated.” The customer sought $4,700,000 in damages and the case was settled for $1,950,000.

July 2015. “Time frame: 2009 to present Claimant alleges unsuitability, overconcentration and misrepresentations involving the recommendation of closed-end funds.” The customer sought $5 million in damages and the case was settled for $6,218,529.95.

June 2017. “Time frame: June 30, 2013 – March 31, 2017 Claimant alleges unsuitable recommendations and misrepresentations in connection with its purchases of Puerto Rico bonds and closed-end municipal bond funds.” The customer is seeking $190,791.86 in damages and the case is currently pending.

December 2014. “Time frame: unspecified Against FAs: claimant alleges fas recommended unsuitable closed end funds and failed to disclose the risks.” The customer is seeking $9,806,404 in damages and the case is currently pending.

July 2014. “Time frame: 2009-present Claimants allege fas unsuitably recommended high concentration in risky closed-end funds and misrepresented the risks.” The customer sought $6,977,165 in damages and the case was settled for $5 million.

June 2014. “Time frame: 2008-present Claimant alleges that recommendations of closed-end funds were unsuitable.” The customer is seeking $5,846,326 in damages and the case is currently pending.

May 2014. “Allegations Time Frame: Unspecified Claimant alleges that FAs recommended unsuitable closed-end funds and failed to disclose the risks.” The customer sought $8,760,051 in damages and the case was settled for $2.5 million.

April 2014. “Time frame: 2011-present Claimant allege that FAs made unsuitable recommendations to invest overly-concentrated closed end funds investments.” The customer sought $5 million in damages and the case was settled for $1.9 million.

March 2014. “Time frame: 2009-present Claimants allege that fa recommended a “reckless and unsuitable concentration in high risk” closed-end funds and subsequently recommended to hold the investments.” The customer sought $2,714,814 in damages and the case was settled for $1,267,762.73.

February 2014. “Time frame: 2012-present Claimants allege that FA recommended a reckless and unsuitable concentration in high risk investments.” The customer sought $5,300,000 in damages and the case was settled for $2,800,000.

November 2013. “Allegations Client alleges overconcentration and misrepresentations concerning closed-end funds. Time Frame: 2004-Present.” The customer sought $5,622,962 and the case was settled for $2,599,999.

November 2013. “Time Frame:- 2004-present Client alleges over concentration and misrepresentations concerning closed end funds.” The customer sought $11,932,047 in damages and the case was settled for $5,500,000.

November 2013. “Time frame: 2004-present Client alleges overconcentration and misrepresentations concerning closed-end funds.” The customer sought $22,827,627 in damages and the case was settled for $16,248,554.81.

October 2013. “Client alleges overconcentration and misrepresentations concerning closed-end funds. Time frame: 2004-present. The customer is seeking $25,594,000 in damages and the case is currently pending.

October 2013. “Client alleges overconcentration and misrepresentations concerning closed-end funds. Time frame: 2004-present.” The customer sought $25,594,000 and the case was settled for $6,500,000.

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 Ramirez’s customers.

Erez Law represents investors in the United States 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.