The investment fraud lawyers at Meyer Wilson are currently investigating claims against UBS Puerto Rico of fraud involving bond funds. Meyer Wilson is looking into potential recovery for victims of this alleged fraud.
Investors may have been sold closed-end bond funds without warning of the potential risks. Many others may have received unsuitable recommendations to invest when they didn't have adequate funds to afford those risks. According to the Wall Street Journal, there are 23 of these closed-end funds currently in question, and several of them half lost more than half their value.
According to a New York Times report, "UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds to meet margin calls."
UBS recently announced that it would begin an internal investigation into the practices of some of its Puerto Rico brokers.
This is not the first time in recent years that UBS has been at the center of a scandal like this. Just last year, UBS agreed to pay a $1.5 billion settlement for manipulating interest rates, a former UBS trader received a seven-year prison sentence for fraud and the SEC required the bank to pay a $26.6 million settlement based on allegations that they concealed a liquidity crisis.
Since Puerto Rico is a commonwealth of the U.S., it is regulated by the SEC. UBS is one of the few banks in Puerto Rico that has such a large team of brokers on the actual island- five total branches and 132 brokers. For years, the bank's mutual funds were doing well. For example, the Tax Free Puerto Rico Fund II was showing a five-year return of 6.8 percent.
Puerto Rico's economic struggles have prompted banks like UBS and Wells Fargo to warn its brokers not to recommend purchasing Puerto Rican debt without first properly warning investors of the risks. The funds managed by UBS Puerto Rico are also highly leveraged. To use Tax Free Puerto Rico Fund II as an example again, the leverage ratio for this fund is 53 percent which means that for every dollar of investor assets it possesses, it has another dollar in borrowed money.
Adding to this problem, many investors were encouraged or not adequately warned against taking out margin loans in order to buy into these funds, presenting a substantial risk of financial losses. Now, many UBS brokers are accused of encouraging these risky investments so that they could receive a commission.
If you suffered substantial financial losses because you were sold a UBS Puerto Rico fund such as Puerto Rico AAA Portfolio Based Funds I and II, Puerto Rico Investors Bond Fund I, Tax-Free Puerto Rico Funds I and II, or any other closed-end fund that recently suffered a substantial decline in value, you may be entitled to take legal action to recover your losses. Contact an investment fraud attorney at Meyer Wilson today to discuss your case.