The Financial Industry Regulatory Authority ordered UBS to pay $750,000 in damages to two Puerto Rico bondholders for what the investors called gross failure of guidance and fraud.
The plaintiffs Jose Rivera Riera, his wife Jenny Robles Adorno, and Rivera Riera's company Desarrollos Jarra SE had sought a larger sum from UBS Financial Services of Puerto Rico and UBS Financial Services. At the close of the hearing last year they had sought compensatory damages between $1,163,876 and $1,337,140, attorneys' fees from $384,079 to $441,256, pre-judgement interest at 4.25% per year accruing from February 2015 to September 2016, disgorgement of total loan interest and charges of $1,209,871, and disgorgement of December 2012 commissions of $66,697. This would have totaled over $3.1 million.
One of the couple's attorneys, Luis Miñana, said he found the size of the award to be frustrating. Miñana is with Espada, Miñana & Pedrosa Law Offices PSC.
UBS spokesman Gregg Rosenberg said, "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. UBS notes that the decision in this case was based on the facts and circumstances particular to this particular claimant, and is not indicative of how other panels may rule with regard to other customers who invested in similar products."
The claimants alleged that UBS had mismanaged their account, encouraged them to over-concentrate their investments in Puerto Rico, which was an unsuitable investment, and had engaged in fraud. While UBS was sending out letters to its professionals to get rid of its own holdings of Puerto Rico debt, its Puerto Rico professionals were selling leveraged closed-ended funds to local investors, Miñana said.
The claimants have agreed to pay one third of the ruling's award to their attorneys and will have to pay an additional $17,250 to FINRA for half of the total hearing session fees.
The Rivera claims are among many being made against the sellers of closed-ended funds in Puerto Rico. These funds were sold exclusively to island residents.
Miñana said his firm was working on more than 100 claims of this type. He said it was a slow and expensive process to go through FINRA arbitration. He estimated that more than 75% of claims large enough to warrant legal representation in arbitration cases haven't yet been filed.
The SEC, along with the Financial Industry Regulatory Authority, settled with UBS Financial Services, Inc. of Puerto Rico for $34 million in September 2015 after the regulators found the firm failed to supervise the suitability of transactions in Puerto Rican closed-end fund shares.
