SAN JUAN, Puerto Rico, May 20, 2014 (GLOBE NEWSWIRE) — The Securities Arbitration Law Firm of Klayman & Toskes, P.A., www.perdidasenbonospr.com; www.sueubspuertorico.com, together with Carlo Law Offices, P.S.C. located in Puerto Rico, announced today that they filed a claim against UBS Financial Services Incorporated of Puerto Rico, UBS Financial Services, Inc. (NYSE:UBS), and UBS Trust Company of Puerto Rico (collectively “UBS”), on behalf of Asociación De Empleados Del Estado Libre Asociado de Puerto Rico (“AEELA”) www.aeela.com, for losses sustained in Puerto Rico bonds. The claim was filed with the Financial Industry Regulatory Authority and seeks damages of $70 million.
According to the Claim, AEELA and UBS entered into a Consulting Services Agreement whereby UBS agreed to provide various financial services for assets managed by it and third parties. The assets, while under UBS’ supervision, grew to over $650 million. One of the accounts that UBS supervised on an advisory basis was a UBS account handled by The Castillo Financial Group. Starting in 2010 and continuing through 2012, UBS increased the amount of assets AEELA held in the UBS account from $50 million to over $300 million, and, with the additional assets, purchased nearly $179 million in Puerto Rico Government Bonds (“PRGBs”) in two (2) years, increasing AEELA’s PRGB holdings from $74 million to $212 million. The additional purchases increased the concentration of PRGBs in AEELA’s portfolio to over 30%.
In addition to increasing the concentration in PRGBs, UBS recommended PRGBs that it underwrote and held in its inventory which carried weaker credit ratings than other PRGBs that were readily available in the open market. UBS sold AEELA large positions in these locally traded PRGBs which created a liquidity issue as there are limited buyers for such large positions. Further, UBS through its recommendations, increased the duration of the bond holdings in AEELA’s portfolio thereby exposing AEELA to significant interest rate risk. The portfolio devised by UBS was far riskier than the Barclays Aggregate Bond Index which was the model benchmark UBS used for AEELA’s portfolio. UBS, for its own financial gain and to the detriment of AEELA, recommended and sold AEELA bonds that were from UBS’ primary offering and/or were principal trades whereby UBS made millions of dollars. AEELA, which sought a low-risk fixed-income portfolio, unknowingly held a portfolio that was exposed to a concentration in locally traded PRGBs with lower credit quality, longer durations, interest rate risk and lacked full liquidity available to other investments that trade in the United States.
In addition to representing AEELA, Klayman & Toskes and Carlo Law Offices are representing numerous families and corporations from across Puerto Rico who sustained substantial losses in Puerto Rico Bonds and Bond Funds, in arbitration claims against UBS and other full-service brokerage firms. The sole purpose of this release is to investigate, on behalf of our clients, the sales practices of UBS in connection with the sale of Puerto Rico Bonds and Bond Funds to their customers. Current and former customers of UBS, or other full-service brokerage firms in Puerto Rico, who purchased Puerto Rico Bonds and Bond Funds, and have information relating to the manner in which the firm represented these products, are encouraged to contact Steven D. Toskes of Klayman & Toskes, or Lcdo. Osvaldo Carlo of Carlo Law Offices, at (787) 919-7325, or visit us on the web at www.perdidasenbonospr.com; www.sueubspuertorico.com.