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[NEW YORK] Securities arbitrators have ordered UBS AG to pay an investor US$1.45 million for losses incurred by its Puerto Rico closed-end bond funds, according to a ruling.
A Financial Industry Regulatory Authority (FINRA) arbitration panel in San Juan, late Thursday, found two UBS units liable in the case, which alleged securities fraud, misrepresentation and other misdeeds, according to the ruling.
Many of the Puerto Rico funds sold by UBS were highly concentrated in the debt of the Caribbean island's government and related entities.
Some of the funds lost half to nearly two-thirds of their value between March 2011 and October 2013, amid fears about the size of Puerto Rico's debt burden and the weakness of its economy. They have failed since to recover.
UBS is defending against hundreds of customer complaints and arbitration claims, collectively seeking US$1.5 billion in damages, the firm said in a Feb 2 disclosure statement on Feb Of those, the firm has resolved US$284 million in claims through settlements or the full arbitration process, according to the disclosure. "Although the arbitrators awarded less than the full damages the claimant requested, UBS is disappointed with the decision to award any damages, with which we respectfully disagree," a UBS spokesman said in a statement.
Over 20 years, the funds provided excellent returns, he said.
The investor, Christel Marie Bengoa Lopez, filed the case in 2014, seeking US$2 million in damages. She had invested a US$5 million gift she had received after her father sold his business, according to a statement of claim.
Her UBS broker had promoted the funds as safe and conservative investments, but steered her to a risky strategy that involved using proceeds of a UBS issued loan to buy more of the securities, according to the claim.
The arbitrators, as is typical, did not provide reasons for their decision.
UBS, in September 2015, agreed to pay almost US$34 million to settle charges from the US Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA), Wall Street's industry-funded watchdog, that it failed to supervise sales of the funds it sponsored to clients in the US territory.