UBS Puerto Rico Bond Complaint Dismissed by SEC, As Losses Mount

An Administrative Law Judge with the U.S. Securities and Exchange Commission (SEC) dismissed a complaint that accused UBS of misleading investors in connection with Puerto Rico bond funds, but the financial firm will likely face continuing claims on behalf of individual investors who are experiencing substantial losses.

The SEC filed a complaint against UBS over their handling of the Puerto Rico bonds, claiming that the company “mislead investors to conceal a liquidity crisis and mask UBS’ control of the secondary market for 23 proprietary closed-end funds.” The SEC also alleged the UBS financial officials committed fraud by selling a safe investment to clients but then selling its own shares back off because of the financial risk.

Administrative Law Judge Brena P. Murray has dismissed the SEC complaint against Swiss bank UBS AG and Capital Markets at UBS Puerto Rico, finding that the companies did not engage in a fraudulent course of conduct or scheme to mislead customers to invest in Puerto Rico municipal bond funds, because during the time between 2008 and 2009 they appeared to be a safe and profitable investment.

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The ruling in this complaint only includes the 2008 through 2009 time period, when the global financial markets were in a period of turmoil and investment firms were looking for ways out. Post 2009 investment losses may show more supporting evidence that investments in Puerto Rico municipal bond funds were neither profitable nor stable investments.

Investor UBS Puerto Rico Bond Fund Losses

According to a report by Reuters, losses from Puerto Rico bonds and securities add up to $4.52 billion so far this year, and many of these investors are now pursuing financial fraud lawsuits against UBS and other brokers.

The dismissal of the SEC complaint will not impact the flood of investor lawsuits over UBS Puerto Rico bond funds, which are expected to continue rolling in as the losses continue to mount and individuals learn that their financial damages may be recovered by contacting a stock broker fraud lawyer.

Individual investors are able to pursue damages against UBS through an investor arbitration claim with FINRA, which is a non-governmental regulatory body that handles resolution of disputes between investors and stockbrokers and other financial firms. It was created in July 2007, as a successor to the National Association of Securities Dealers, to arbitrate stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.

According to allegations raised in many investor complaints filed recently, UBS pitched investment in Puerto Rico bonds as safe and secure, targeted toward elderly people and others who rely on municipal bond funds for retirement.

Puerto Rico bonds funds have spiraled down into junk ratings as the country undergoes an economic crisis. UBS sold many municipal bond funds that were allegedly over-invested in Puerto Rico bonds. Although the funds previously had high yields and involved special tax benefits, UBS has been targeted for how it has handled the problem.

Last week it was reported that the SEC has initiated an investigation into several mutual fund losses caused by Puerto Rico debt, examining whether institutions adequately disclosed the risk.


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