Former UBS Financial Services Inc. Client Wins FINRA Arbitration for $4.42 Million

Posted on Monday, December 2nd, 2019 at 1:49 pm    

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In August 2019, a former client of UBS Financial Services Incorporated of Puerto Rico and UBS Financial Services, Inc. won an award in a FINRA arbitration for compensatory damages for $4.25 million, plus 6.25% per annum, $170,000 in costs, and a $375 filing fee for losses sustained from losses due to investment in Puerto Rico bonds. The investors were clients of financial advisor Nelson Rodriguez (CRD# 1092772) and Raul Escudero (CRD# 1357156). The FINRA panel executed expungement directives for these brokers.

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 violations of Puerto Rico Uniform Securities Act (PRUSA) and the FINRA Code of Conduct; common law fraud and constructive fraud; negligent misrepresentation; breach of fiduciary duty under Puerto Rico law; breach of contract; negligent management/ supervision; and fraudulent concealment. The causes of action relate to Claimants’ investments in Puerto Rico bonds and closed-end bond funds, as well as the use of securities-backed loans. The FINRA arbitration hearing was conducted in San Juan, Puerto Rico.

Rodriguez has been registered with UBS Financial Services, Inc. of Puerto Rico in San Juan, Puerto Rico since 1991. Rodriguez has also been the subject of 80 customer complaints between 2005 and 2019, one of which was denied and two were closed without action, according to his CRD report. Most complaints are regarding Puerto Rico closed-end funds and Puerto Rico municipal bond losses.

Escudero has been registered with Herbert J. Sims & Co. Inc. in Guaynabo, Puerto Rico since 2018. Previously, Escudero was registered with Santander Securities LLC in San Juan, Puerto Rico from 2006 to 2018 and with UBS Financial Services Incorporated of Puerto Rico from 1991 to 2006. Escudero has been the subject of 37 customer complaints between 2015 and 2019, according to his CRD report, most of which are related to Puerto Rico municipal bond losses.

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. and UBS Financial Services, Inc. of Puerto Rico may be liable for investment or other losses suffered by its 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.

Disclaimer: Clients are responsible for costs. Contingency fee is calculated before deducting costs incurred in the case.