UBS Financial Services Inc. And UBS Financial Services Of Puerto Rico Ordered To Pay Investors Over $2.5 Million For Losses Involving UBS's Proprietary Puerto Rican Bond Funds

Aug 14, 2015, 11:43 ET from Shepherd Smith Edwards & Kantas LLP

SAN JUAN, Puerto Rico, Aug. 14, 2015 /PRNewswire/ -- UBS Financial Services Inc. and UBS Financial Services of Puerto Rico (collectively "UBS") have been ordered to pay investors in San Juan over $2,500,000 by a FINRA arbitration panel for losses the investors incurred in UBS's Closed-End Puerto Rico bond funds (the "Funds").  The investors were clients of Jose Gabriel Ramirez, a/k/a "Whopper" and then Miguel Ferrer, who was the head of UBS in Puerto Rico for years.  According to the claim, the retired couple entrusted all of their securities investments to Ramirez and UBS in or around 2008. 

The investors claimed Ramirez and UBS invested excessive amounts of their savings into UBS's own Funds, which over-concentrated in Puerto Rico bonds UBS had underwritten.  UBS's Funds, which were not traded on any exchange, were typically leveraged 2 to 1, resulting in them being concentrated geographically and highly leveraged, resulting in them being high risk.  To make matters worse, the couple claimed they were advised to borrow additional money from UBS and use that money to buy yet more bond funds (using leverage to buy leveraged funds).  This type of investing, which was forbidden yet, apparently so rampant that UBS has given it a name – "loan recycling" – greatly increases an investor's risk and profits to the firm. 

Ultimately, the couple lost millions of dollars of their savings when the market for Puerto Rico bonds collapsed in 2013, as did hundreds of other investors and clients of UBS.  Investors, including many who should never have been invested in municipal bonds, or should have had far less of their portfolios invested in this area, sustained huge losses as UBS's funds plummeted and the markets dried up, leaving many investors with no way to get their money back out easily.  As UBS's Puerto Rico funds were highly leveraged, the drop in the Puerto Rico bond market was substantially elevated for UBS customers, effectively losing twice as much as the market.

If you are or were a client of UBS, or suffered losses in any other municipal bond investments made at the recommendation of your broker, contact the law firm of Shepherd, Smith, Edwards & Kantas LLP for a free, confidential evaluation of your account.  We have a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. More information can also be found on our blog at

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SOURCE Shepherd Smith Edwards & Kantas LLP