UBS Ordered to Pay $7.8M Over Puerto Rico Bonds
Wirehouse UBS is on the hook for $7.8 million more over its alleged breaches tied to Puerto Rico bonds and closed-end bond funds, Finra says.
A Finra arbitration panel has ruled in favor of Pedro Diez and Carmen Macias in Puerto Rico, as well as their trust and their construction business, Vissepo & Diez Construction Corp., who claimed breach of fiduciary duty, negligent supervision, fraud and deceit and violations of suitability rules, among other infractions, related to how UBS handled the bonds and bond funds as well as used margin loans to buy the securities, according to an arbitration award document published by the industry’s self-regulator.
The claimants originally sought more than $15 million in compensatory damages and at least $30 million in punitive damages in 2016, but amended the claim to compensatory damages in excess of $5 million, unspecified punitive damages, costs and lawyer fees, according to the award document. The Finra arbitration panel ordered UBS to pay them approximately $1.4 million in compensatory damages as well as purchase around $6.1 million in assets from their accounts, the regulator says. UBS must also pay the claimants $100,000 in costs and $300,000 in lawyers’ fees, according to the award document.
UBS and its individual advisors have been the target of multiple claims as well as fines from Finra and the SEC related to the sales of Puerto Rico bonds, the market for which collapsed in 2013, and related securities.
In March, a former UBS broker received a one-year prison sentence after pleading guilty for his role in the fraudulent use of credit lines to buy securities. But UBS has also scored some victories. In September, a New York federal judge denied a request for class action certification filed by investors who claimed that the firm had failed to analyze the suitability of closed-end mutual funds tied to the bonds.