Last week, the Securities and Exchange Commission (SEC) initiated administrative
proceedings against UBS Financial Services Inc. of Puerto Rico and one
of its former branch managers for improperly supervising one of its former
brokers. The former broker allegedly advised customers to invest in UBS
Puerto Rico affiliated mutual funds, using credit from a UBS Puerto Rico
affiliated bank. Such a move exposed the customers to losses, while the
broker allegedly profited.
UBS Puerto Rico has agreed to pay $15 million dollars to settle the case
with the SEC, which will be put into a fund for investors who were harmed
by this alleged misconduct. The former branch manager also agreed to settle
the SEC’s charges by paying $25,000 as a penalty and stepping out
of his role as a supervisor for one year.
In addition, the SEC filed a separate complaint against UBS Puerto Rico
representative Jose Ramirez, Jr., from the Guaynabo branch. According
to the SEC, Ramirez profited $2.8 million solely from advising his customers
to use money from UBS Bank USA lines of credit to buy extra shares in
UBS Puerto Rico closed-end mutual funds.
The SEC also accused Ramirez of concealing this alleged misconduct by having
those same customers transfer the money to a third party bank before putting
it into UBS Puerto Rico brokerage accounts. These investments allegedly
lost value, forcing customers to choose between paying down part of the
loans or risk liquidation of their investments.
Among the allegations made in these cases is that UBS Puerto Rico did not
have the proper system in place to detect and prevent this type of securities
fraud. According to the SEC, the brokerage firm was privy to accusations
of investment misconduct regarding accounts Ramirez managed on two separate
occasions, but lacked procedures that would ensure follow-up with these
types of claims. Under industry rules, brokerage firms must design and
implement a system to reasonably supervise its brokers and follow up on
red flags. If firms do not do this, they can be held liable for their
broker’s undetected misconduct.
If you have invested with UBS Puerto Rico and lost money as a result, our
securities lawyers at Meyer Wilson may be able to help. Call us for a
free case evaluation and learn how we may be able to help you take legal action.