FINRA Arbitration filed against UBS to recover Puerto Rico Fund Losses

The White Law Group announces the filing of a FINRA arbitration claim against UBS Financial Services Incorporated of Puerto Rico to attempt to recover investment losses in two UBS Puerto Rico Funds.
By: The White Law Group
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CHICAGO - Oct. 22, 2013 - PRLog -- The claim seeks recovery of investment losses of over $450,000.00.  Filed by The White Law Group, the claim is on behalf of a retired investor living in Spain who is a citizen of Puerto Rico.  The lawsuit alleges claims for fraud, breach of fiduciary duty, negligence, and negligent supervision.

The claim specifically alleges that the investor was unsuitably invested in two proprietary closed-end funds offered by UBS as part of their UBS Puerto Rico Family of Funds.  The two funds at issue are the UBS Puerto Rico Income Fund IV and the UBS Puerto Rico Income Fund V.  These two funds, it is alleged, are extremely complex and risky and were not appropriate for this conservative, retired investor.  It appears that the funds have also recently declined in value by more than 50%.

Broker-dealers have a fiduciary duty to perform adequate due diligence on any investment prior to recommending them for sale to their clients and to ensure that the investments it recommends are appropriate for the client in light of the clients age, investment experience, net worth, and investment objectives.

In the claim, The White Law Group argues that UBS only selected the investments because of the commissions generated as a result of the recommendations and that UBS failed to perform the proper due diligence on the UBS Puerto Rico Funds prior to offering them for sale to their client.

In 2012, the SEC charged UBS Financial Services Inc. of Puerto Rico with making misleading statements to investors, concealing a liquidity crisis, and masking its control of the secondary market for 23 proprietary closed-end mutual funds, including, upon information and belief, the two funds sold to Claimant.  UBS Puerto Rico agreed to settle the SEC’s charges and to pay $11.5 million in disgorgement, $1.1 million in prejudgment interest, and a penalty of $14 million.

According to the SEC’s order instituting settled administrative proceedings against UBS Puerto Rico, the firm knew about a significant “supply and demand imbalance” and discussed the “weak secondary market” internally. However, UBS Puerto Rico misled investors and failed to disclose that it controlled the secondary market, where investors sought to sell their shares in the funds. According to the SEC, UBS Puerto Rico also significantly increased its inventory holdings in the closed-end funds in order to prop up market prices, bolster liquidity, and promote the appearance of a stable market.

The SEC’s Order also states that UBS Puerto Rico’s parent firm determined in the spring of 2009 that UBS Puerto Rico’s growing closed-end fund inventory represented a financial risk, and directed the firm to reduce its inventory by 75 percent to reduce that risk.  According to the SEC, to accomplish the reduction, UBS Puerto Rico executed a plan dubbed “Objective: Soft Landing” and allegedly increased solicitation efforts to further reduce its inventory while making misrepresentations and failing to disclose UBS Puerto Rico’s withdrawal of secondary market support.

Finally, The White Law Group has alleged in the claim that this investor is a victim of UBS’s “Objective: Soft Landing.”

When asked to comment on the claim, D. Daxton White, the managing partner of The White Law Group, stated “It appears that our client is but one of many such individuals that have been defrauded by ‘Objective: Soft Landing.’ While UBS may have achieved its soft landing by dumping its holdings on main street investors, its clients were not so fortunate.  Many of these individuals may have cognizable claims against UBS to recover their losses.”

For more information on the claim filed by The White Law Group, please contact the firm's Boca Raton, Florida office at 561-807-6804.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit

For more information on the firm’s investigation in to UBS’s Puerto Rico Family of Funds, visit

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Tags:Finra Arbitration, Puerto Rico, UBS Funds, Soft Landing, SEC attorney, Finra Lawyer
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