The SEC and FINRA have brought charges and fined UBS relating to sales practices and supervision of their UBS Puerto Rico Bond Funds.
The SEC press release and Orders can be found here: SEC Press Release 2015-217. The SEC alleged that UBS Financial Services of Puerto Rico (UBSPR) failed to supervise its broker in relation to solicited loans used to purchase additional UBSPR closed end funds, while failing to disclose the risks of this strategy and misrepresenting the safety of the strategy. The SEC further alleged that UBSPR did not implement reasonable supervisory procedures and had inadequate systems in place to prevent and detect this wrongful conduct.
UBS was censured and fined over fourteen million dollars.
FINRA also fined UBSPR for actions related to its Puerto Rico Bond funds – the press release states the following:
“…for more than four years, UBS PR failed to monitor the combination of leverage and concentration levels in customer accounts to ensure that the transactions were suitable given the customers’ risk objectives and profiles. The firm failed to implement a reasonably designed system to identify and prevent unsuitable transactions in light of the unique Puerto Rican economy, in which retail customers typically maintained high levels of concentration in Puerto Rican assets and often used those highly concentrated accounts as collateral for cash loans. Despite UBS PR’s knowledge of these common practices, it failed to adequately monitor concentration and leverage levels to identify whether certain customers’ CEF transactions were suitable in light of the increased risks in their existing portfolio.”
The above sales practices and lack of supervision have formed the basis of hundreds of FINRA arbitration claims pending against UBS and UBSPR. If you would like to speak to an attorney about possible claims related to UBS of Puerto Rico bond funds, please contact Scott Greco for a free consultation.