UBS PUERTO RICO BOND FUND LAWYERS BASED IN NEW YORK

Puerto Rico Crisis

With a public debt of over $87 billion, U.S. territory Puerto Rico has left its 3.7 million residents with an estimated debt of $23,000 per resident. A variety of events were blamed to be the cause of this crisis, including the loss of tax incentives for industry, a decrease in the population, an increase in debt levels as well as a bureaucratic government. However, the biggest blame goes to the banks during the 2008 financial crisis that acted as a catalyst leading to Puerto Rico’s debt crisis, especially relating to the UBS Puerto Rico closed-end-bond funds.

UBS Puerto Rico Closed-End Funds

23 closed-end funds were created by UBS Financial Services Inc. Puerto Rico, also known as UBS PR, where they were mostly filled with government-related debt of Puerto Rico. One of the conditions of investing in the UBS was that they have to be Puerto Ricans and investors were attracted to these closed-end funds as interest payments were tax-free – they were not taxed by the state, municipal or federal government taxes – and appeared to make a safe investment for their retirement as they were sold as safe investments. Through these funds, UBS earned over $200 million in underwriting fees through underwriting more than $10 billion worth of bonds. On top of that, UBS also received commissions on the trades of these funds and earned fees while the investment advisors received management fees for managing the funds.

The 23 funds include:

• the Tax-Free Puerto Rico Fund I-II
• the Puerto Rico Investors Bond Fund
• Tax-Free Puerto Rico Target Maturity Fund
• Puerto Rico AAA Portfolio Target Maturity Fund
• Puerto Rico Fixed Income Fund I-VI
• Puerto Rico Investors Tax-Free Fund I-VI
• Puerto Rico AAA Portfolio Bond Fund I-II
• Puerto Rico Tax-Free Target Maturity Fund I-II

With limited customers due to the tax-free status, unlisted on any market exchange and having no other banks to sell their closed-end funds to, UBS PR bought over securities and artificially raised the value of the bonds, an unlawful practice classified as stock manipulation, when clients started requested to sell their bonds. As the inventory increased, UBS PR gave out incentives to encourage their financial advisors to make more sales while having existing clients hold on to their bonds for a longer time. Subsequently in 2009, the value of 21 out of 23 of UBS PR funds dipped tremendously and could not be concealed. investors were misinformed by financial advisors to take advantage of the plunge. In 2014, investors were forced to sell at lower prices while others had their investments made into losses.

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With many clients sharing that their financial advisors have little to no advice regarding their present situation, we represent our clients to make claims against UBS’ recommendations and sales tactics. The risks present in the bonds have been downplayed by sales representatives where UBS leveraged up to 100% of the investments to raise additional cash, where U.S. based funds as not allowed to make such large leverage risks. Investors were also misled to borrow money to fund the investment.