UBS Puerto Rico Bond Funds Lawyer

A UBS Puerto Rico bond funds lawyer at Weltz Law represents investors who lost money in UBS Puerto Rico closed-end bond funds. These funds were packed with Puerto Rico government debt and often bought with borrowed money. When Puerto Rico's debt crisis hit, values collapsed. Disputes with the broker and firm may belong in FINRA arbitration.

Our UBS Puerto Rico bond funds lawyers work inside the FINRA dispute resolution forum on behalf of investors nationwide. FINRA stands for the Financial Industry Regulatory Authority. It oversees brokerage firms and runs the arbitration system for most disputes between investors and their brokers.

This page is part of our alternative investment attorney section, within our broader securities lawyer practice.

What Were the UBS Puerto Rico Closed-End Bond Funds?

The UBS Puerto Rico closed-end bond funds were 23 proprietary funds created and sold by UBS Financial Services of Puerto Rico. They held large amounts of Puerto Rico government and agency bonds. The funds were sold mainly to Puerto Rico residents, often as safe, tax-free retirement income.

A closed-end fund issues a fixed number of shares. Investors who want out must find a buyer rather than redeem shares with the fund. Learn more on our closed-end funds page.

The UBS Puerto Rico funds had several features that raised risk. Many borrowed heavily to boost income. Many were concentrated in Puerto Rico debt. And UBS Puerto Rico controlled much of the trading in their shares.

The fund names included the Tax-Free Puerto Rico Fund series and the Puerto Rico Fixed Income Fund series. Others were the Puerto Rico Investors Tax-Free Fund series and the Puerto Rico AAA Portfolio funds.

How Did Puerto Rico's Debt Crisis Affect UBS Puerto Rico Bond Fund Investors?

Puerto Rico's government took on huge debts while its economy shrank and its population fell. In 2013, Puerto Rico bonds sold off sharply. Ratings fell to junk in 2014. In 2016, Congress passed a law creating a federal oversight board, and Puerto Rico entered a court-supervised debt restructuring in 2017.

Funds heavy in Puerto Rico bonds took the full hit. Their share prices fell steeply as the bonds lost value and buyers disappeared.

For investors who held these funds as their core retirement savings, the losses were devastating. Many had little else to fall back on.

What Did the SEC Find About UBS Puerto Rico's Closed-End Fund Practices?

In 2012, the SEC found that UBS Puerto Rico misled investors about the liquidity and pricing of its closed-end funds. The firm did not disclose that it controlled the secondary market for the 23 funds. It also propped up prices before selling much of its own inventory to customers.

According to the SEC, the firm knew of a "supply and demand imbalance" and a "weak secondary market" in 2008 and 2009. It built up its inventory to keep prices looking stable.

Then, in 2009, it cut that inventory by 75%, largely by selling fund shares to its own customers. The SEC also found the firm's trading desk undercut customer sell orders. UBS Puerto Rico neither admitted nor denied the findings.

What Did FINRA Find About UBS Puerto Rico's Supervision of These Sales?

In 2015, FINRA found that UBS Puerto Rico failed to monitor borrowing and concentration in customer accounts holding the closed-end funds. Many customers held concentrated positions and used them as collateral for loans. When values fell, maintenance calls forced sales at a loss.

FINRA found the firm lacked a reasonable system to address the risks of concentrated, borrowed positions in Puerto Rico's economy. The supervisory failures lasted more than four years.

The SEC separately took action against UBS Puerto Rico in 2015 over its supervision of a former broker. The firm neither admitted nor denied the findings in either matter.

How Did Borrowing Make UBS Puerto Rico Fund Losses Worse?

Many investors were encouraged to borrow against their UBS Puerto Rico fund shares through lines of credit, then use the money to buy more shares. That doubled their exposure. When prices fell, maintenance calls forced sales at low prices and losses grew far larger.

Here's how it could play out. An investor holds $500,000 in UBS Puerto Rico funds. A broker suggests a credit line against those shares and uses part of it to buy more funds. Now the investor has more than $500,000 tied to Puerto Rico debt, plus a loan.

When the funds drop 40%, the lender demands more collateral. With no cash to add, the investor is forced to sell at the bottom and still owes on the loan.

Learn more on our SBLOC lawyer and margin abuse pages.

What Claims May UBS Puerto Rico Bond Fund Investors Have in FINRA Arbitration?

UBS Puerto Rico bond fund investors may have FINRA claims based on unsuitable recommendations, misrepresentation of risk and liquidity, and over-concentration. Improper borrowing and failure to supervise may also apply. The claim focuses on what the broker recommended and what the firm should have caught.

Common claims in these cases include:

• Unsuitability: Funds or borrowing that did not fit the investor's age, goals, or risk level. See our unsuitable investments page.
• Misrepresentation: Describing the funds as safe, liquid, or conservative. Read about misleading information.
• Over-concentration: Too much of an account in Puerto Rico funds. Learn more about over-concentration.
• Failure to supervise: Weak oversight of concentration and borrowing. See our failure to supervise page.

Government findings can help explain what happened. But they do not decide an individual investor's claim. A FINRA panel looks at each investor's own facts.

Who Was Most Harmed by UBS Puerto Rico Bond Fund Losses?

Retirees and conservative investors in Puerto Rico were hurt most. Many were told the funds were safe, tax-free income for retirement. Some held most of their savings in the funds, and some had borrowed against them, magnifying their losses.

Picture a retired teacher in San Juan with most of her savings in several UBS Puerto Rico funds. Her broker set up a credit line to buy more. When the funds collapsed, she faced maintenance calls, forced sales, and a remaining loan balance.

When older investors are involved, these sales may also raise concerns about financial elder abuse.

How Does the FINRA Six-Year Window Apply to UBS Puerto Rico Bond Fund Claims?

The FINRA eligibility rule generally bars claims filed more than six years after the event that caused the dispute. Most UBS Puerto Rico fund purchases and losses happened between 2008 and 2014. Many of those claims are now outside the six-year window.

This is a real hurdle. Many UBS Puerto Rico fund investors have already brought claims, and many others may be time-barred.

Still, dates matter. Later purchases, later borrowing, or later events in an account may change the picture. State deadlines may also apply. Our UBS Puerto Rico bond funds lawyers review every key date early.

What Damages Can a FINRA Panel Consider in a UBS Puerto Rico Bond Fund Claim?

A FINRA panel may consider the money an investor lost, losses from forced sales, and interest paid on loans. It may also weigh what the money might have earned in suitable investments, plus costs. The panel decides which measures fit the facts. No one can say in advance what a panel will award.

Out-of-pocket damages compare what went in with what came back. Well-managed account damages ask what the account would have earned with a suitable, diversified strategy and no borrowing.

The account records, loan records, and the firm's supervision files shape the arguments our FINRA arbitration attorneys can make.

What Records Should You Gather for a UBS Puerto Rico Bond Funds Lawyer?

Gather your account statements, trade confirmations, credit line agreements, maintenance call notices, new account forms, fund documents, and every communication with your broker. These records show what you bought, how much you borrowed, and what happened when prices fell.

Loan and maintenance call records matter a great deal. They show how borrowing added to the losses.

New account forms list the goals and risk level the broker recorded for you. If something is missing, the brokerage firm keeps its own records, and many can be requested during discovery.

How Do Our UBS Puerto Rico Bond Funds Lawyers Handle a FINRA Claim?

Our UBS Puerto Rico bond funds lawyers start with the dates. When did you buy, when did you borrow, and when did the losses happen? Then our team looks at what the broker recommended and how concentrated your account became. Those answers shape whether a FINRA claim fits.

Next, our team compares the holdings and borrowing with your age, goals, and risk tolerance.

If the facts support a claim, our FINRA arbitration attorneys draft and file the Statement of Claim. That is the written filing that starts a FINRA case.

Discovery follows. Our team asks for the firm's supervision records, concentration and borrowing reports, loan files, and the broker's commission data.

If the case reaches a final hearing, our UBS Puerto Rico bond funds lawyers present the evidence and witnesses to the panel. No one can predict how a panel will rule. Our page on FINRA arbitration explains each stage.

Talk With a UBS Puerto Rico Bond Funds Lawyer at Weltz Law

Did a broker put your savings, or borrowed money, into UBS Puerto Rico closed-end bond funds? It may be worth a closer look. A conversation with a UBS Puerto Rico bond funds lawyer can help you understand what options may exist in FINRA arbitration. That includes whether timing still allows a claim.

Our UBS Puerto Rico bond funds lawyers represent investors, retirees, families, and trusts. Bring your statements, loan records, and any messages from your broker. Contact Weltz Law today to talk through what happened.