WASHINGTON — Arbitration panels ordered UBS Financial Services, Inc. and its subsidiary in Puerto Rico to pay more than $5.44 million to investors in the firm's proprietary closed-end mutual funds that predominantly contained Puerto Rico bonds.
The $5.44 million is the combined amount the firm was ordered in August to pay in two separate Financial Industry Regulatory Authority arbitration cases in which investors claimed that UBS acted fraudulently in recommending funds that caused them to suffer significant investment losses.
The two cases are just a small portion of many similar ones investors have filed against UBS and other firms over investments in funds that mostly hold Puerto Rico bonds.
In the most recently decided case, an all-public arbitration panel on Aug. 31 ordered UBS to pay more than $2.9 million to three claimants: Ana Teresa Lopez-Gonzalez; Andres Ricardo Gomez; and Wave Management LLC, which was acting as trustee for the real-estate focused AG Investment Trust. The investors charged the firm with fraud, breach of fiduciary duty, negligent misrepresentation and omission, and failure to supervise under federal securities laws, the Uniform Securities Act of Puerto Rico, Puerto Rican law and FINRA rules.
UBS filed a counterclaim for more than $500,000 alleging three of the claimants failed to pay the company money owed under executed credit line agreements, but the panel denied the company's claim.
Lopez-Gonzalez received about $535,000 in compensatory damages and Ricardo Gomez and Wave Management received a combined $1.85 million. The rest of the $2.9 million included reimbursement for attorneys' fees and an order to pay interest until the full award is completely paid.
The three parties had been part of a larger group of claimants when the case started, but each of the other parties settled with UBS for undisclosed amounts before the final award.
In the other case, an all-public panel on Aug. 11 ordered UBS to pay $2.54 million to Orlando Rodriguez Gonzalez and Milagros Vila Maldonado, a retired couple, who had requested as much as $6 million in compensatory damages after they said their investment advisor recommended an over concentrated position in the UBS fund as well as illegal use of a non-purpose loan to invest in securities. UBS has since fired the couple's advisor, according to a post on the couple's attorney's website.
Gonzalez and Maldonado charged the firm with omission of facts, unsuitability, breach of fiduciary duty, negligence, failure to supervise, fraud, breach of contract, and violation of the Puerto Rico Securities Act.
A UBS spokesperson said the firm "is disappointed with the decision to award any damages" and "respectfully disagrees" with both panels' conclusions. He also noted the awards were based on individual circumstances and did not represent how other arbitration panels may rule in similar cases.
Puerto Rico bond values have decreased significantly since 2013 and have further been hurt by the ongoing fiscal problems the island continues to face.
The spokesperson said UBS is monitoring the situation in Puerto Rico and continues to inform clients about risks and price fluctuations.
