Reuters reported on February 6, 2015 that UBS in Puerto Rico held a meeting during which executives of the firm, including Miguel Ferrer, then the Chairman of UBS Financial Services Inc. of Puerto Rico, threatened financial advisors to sell UBS originated Puerto Rico closed-end bond funds despite the brokers’ and their customers’ growing concerns about “low liquidity, excessive leverage, oversupply and instability.” According to the Reuters article, Mr. Ferrer found “unacceptable” the view of UBS financial advisors who were wary of recommending UBS funds that were loaded with debt of the Puerto Rican government.
According to the Reuters article, in a recording made by an attendee of the meeting, Mr. Ferrer reprimanded the brokers to focus on the positive aspects of the products available or “get a new job,” continuing that it was “bullshit” for brokers to claim that there were no products to sell. Portions of the recorded meeting are available online in the Reuters article.
At the time of the recording, according to Reuters, many of UBS’s funds were highly concentrated in Puerto Rico’s debt at a time when there were concerns about the size of that debt and the weakness of the overall economy. This recording may be beneficial to both claimants and brokers who each have hundreds of millions of dollars in damages because their claims generally alleged that there was a lack of disclosure regarding the attendant risks of bond funds underwritten by UBS.
Investor claims surrounding the PR bond funds have skyrocketed in the past two years. Now, in light of the published details about the meeting by Reuters, it appears the financial advisors who recommended the bond funds to their clients may have also been misled and pressured by UBS. As we have written previously, where proprietary products result in substantial losses to investors, they also damage the registered representatives who must rely on the firm’s marketing and research to sell the products. According to the Reuters article, UBS also pressured its financial advisors with termination if they did not continue to sell the Puerto Rico bond funds. Because of this, those financial advisors may have claims against UBS PR for losses to their business, the muddying of their professional records and any damages suffered as a result of the investor claims that are reported on the FINRA CRD reports.
Malecki Law has also previously written about duties owed by employing firms to their registered representatives.
Financial advisors and registered representatives have obtained favorable judgments against their employing firms in the recent past. In the early- and mid-2000s, there was a plethora of litigation surrounding the Morgan Keegan bond funds, which were found to have been misleading to both customers as well as the financial advisors who suffered employment and reputational damage as a result of recommendations made based on firm advice and directives.
Financial advisors who worked for and sold Morgan Keegan bond funds that failed in 2008 were often successful in obtaining expungement of the customer disputes from their CRD record, because arbitration panels found that they were not involved in the complained of investment-related sales practice violations and did not know of their employing firm’s failure to perform adequate due diligence on the products they originated and offered for sale to the investing public.