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FINRA Orders UBS to Pay Almost $3M

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New York, NYA FINRA arbitration panel has reportedly ordered UBS to pay almost $3 million to investors who claimed they lost money after they invested in UBS-managed Puerto Rican municipal bonds. The Financial Industry Regulatory Authority (FINRA) panel has made multiple rulings in favor of claimants in arbitrations involving Puerto Rican municipal bonds in recent months.

According to The Wall Street Journal (9/1/15), the most recent ruling was made in favor of Ana Teresa Lopez-Gonzalez and Andres Ricardo Gomez, who filed claims of fraud, breach of fiduciary duty and unsuitability against UBS linked to its handling of Puerto Rican municipal bonds.

Although the investors originally sought $10 million in damages, the FINRA panel - which does not generally offer reasoning for its decisions - ordered $2.4 million in damages, $534,000 in costs and an additional amount in interest. Other investors were initially listed as claimants on the arbitration but settled before the claim was heard.

A spokesperson for UBS said the company was disappointed with the decision.

Complaints concerning UBS Puerto Rico funds were first brought in 2013, with claimants alleging they were sold closed-end funds as being safe investments that provided a steady income. Specifically, investors say they were told the funds were not at risk because they were invested in municipal bonds backed by Puerto Rico’s government. Despite assurances the funds were safe, investors claim they lost up to half of their value in a short time and had no idea the funds were not liquid.

See Video on Puerto Rico UBS Financial Services Debacle


Additionally, some claimants allege they were sold the funds even though the funds were unsuitable given the investors’ age, financial situation and risk tolerance. Finally, they allege UBS made millions in in transaction fees for selling and trading the funds.

In May 2015, Juan Burgos Rosado was awarded $1 million in his claim against UBS. Rosado alleged the funds were unsuitable for him as a 66-year-old first-time investor. In August 2015, UBS was told to pay $2.5 million to a couple from San Juan who invested in Puerto Rico bonds, according to The Wall Street Journal (9/11/15).

Brokers are required to recommend investments that are suitable for an investor, given the investor’s financial situation, age, ability to withstand losses and risk tolerance. Those brokers who fail to recommend suitable investments - or who mislead their investors about the suitability of an investment - could face a FINRA arbitration and could be ordered to pay for the investor’s losses and punitive damages.

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