Despite the downgrade of UBS Puerto Rico’s bonds to junk status, as recently as October 2014, UBS Puerto Rico was recommending that some Puerto Rico clients continue to purchase risky UBS closed-end bond funds that held many of the risky Puerto Rico bonds. These recommendations were made in the face of hundreds of FINRA arbitration claims that Puerto Rico investors filed; blaming UBS for huge losses sustained in these UBS bond funds.
Puerto Rico’s Bond Downgrade
In finance, “junk” bonds are bonds that are rated below investment grade, meaning they are believed to be at a higher risk of default. Because of this higher risk, they pay higher yields than better quality bonds to make them more attractive to investors. You may have seen our previous blog post reporting on the downgrade of Puerto Rico bonds by the major credit rating agencies here, in which we outlined the obligations consistent with the downgrade to junk status.
UBS Puerto Rico Recommends Risky Funds to Brokers and Clients
UBS Puerto Rico has continued to tell brokers that they can recommend the funds to their clients, even after agreeing to a $5.2 million fine and settlement with Puerto Rico’s securities regulator relating to UBS Puerto Rico’s sales of these risky bond funds. According to the settlement, six UBS brokers “may have” directed their clients to improperly borrow money to buy the funds. Let there be no mistake, however. UBS’s system encouraged brokers to recommend that investors borrow money and our law firm and many other firms represent numerous clients who allege that their brokers recommended that they borrow money from UBS.
In spite of the risk that Puerto Rico might not be able to repay their bond obligations, analysts say investors continue to buy Puerto Rico bonds. If you are considering purchasing UBS Puerto Rico bond funds or Puerto Rico bonds, make sure you are fully aware of the risks involved before doing so. Moreover, if you have lost money in Puerto Rico bonds or UBS Puerto Rico bond funds, we recommend that you contact a qualified securities fraud lawyer to discuss your potential claims.
Who can Help with Securities Fraud?
At Dimond Kaplan & Rothstein Law Firm our objective is to protect your interests, resolve your legal dispute and achieve your goals as quickly and efficiently as possible. We have a broad and in-depth class action experience, particularly in securities fraud, in both state and country. Contact us for a consultation!
