UBS Puerto Rico Brokers Expected to be Terminated Amid Significant UBS Closed-End Bond Fund Litigation

The Wall Street Journal reported on July 2, 2015 that many investors may suffer losses as a result of the attempts by Puerto Rico Electric Power Authority (PREPA) to restructure its debt with its creditors in order to avoid a default and other Puerto Rico economic woes.

While clearly many investors are and will continue to be harmed in this market, the pain is likely to be harder felt by two sets of victims of UBS’s closed-end bond funds that are tied to debt issued by PREPA, other utilities and Puerto Rico’s general obligation bonds.

We recently wrote regarding how the brokers who recommend products such as UBS’s closed-end funds may have also been given faulty information from the firm.  Then, Reuters ran an article describing a taped meeting at UBS where leadership threatened the UBS Puerto Rico brokers to sell the closed-end funds at all costs despite growing concerns about the products.  In one of the first arbitration awards to be announced in which UBS was ordered to pay $1 million to an investor related to the UBS closed-end bond funds, a Financial Industry Regulatory Authority (FINRA) arbitrator stated that a recommendation of the bond fund was unsuitable because it was “grossly overconcentrated… any proper UBS branch office or other review should have detected such obvious unsuitability.”

Alleging supervision and other firm failures, Malecki filed a case on behalf of two former UBS Puerto Rico brokers, Jorge Bravo and Teresa Bravo, and anticipates filing other cases on behalf of additional brokers.  The Bravos alleged in their Statement of Claim against UBS that they were both misled and induced by the firm into selling the closed-end bond funds to their clients and were harmed because Teresa Bravo purchased $100,000 of the bond funds herself.

We have been informed that additional brokers may be terminated in the future as a result of the continued fallout over the UBS closed-end bond funds.  These brokers should contact an attorney to discuss their legal options upon their termination, because UBS may be liable for damages to them, as a result of the well-publicized catastrophe that has resulted from the products the brokers were misled and induced to sell, and their clients bough, both upon false pretenses.

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