The Securities Arbitration Law of Firms Klayman & Toskes, P.A. and Carlo Law Offices Comment on Criminal Investigation into Recommended Use of Non-Recourse Loans Secured by UBS’ Puerto Rico Closed-End Funds

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  • July 30, 2015

SAN JUAN, Puerto Rico (Globe Newswire) – July 30, 2015 – The Securities Arbitration Law Firms of Klayman & Toskes, P.A.,, and Carlo Law Offices comment on the criminal investigation into sales practice violations related to the use of non-purpose loans secured by UBS’ closed-end funds.  On July 28, 2015, UBS Group AG (UBS) reported in its SEC Form 6-K filing, “that the DOJ is conducting a criminal investigation into the practice of certain customers and a UBS financial advisor of using non-purpose loans to invest in closed-end securities in violation of their loan agreements and UBS policies.”  The SEC filing also disclosed that UBS is responding to investigations, by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC), concerning sales practices related to non-purpose loans used to invest in UBS’ proprietary closed-end funds concentrated in Puerto Rico bonds.  Many investors have experienced margin calls from UBS loans from declines in Puerto Rico bond values due to an increasing risk of default, including the pending default in Puerto Rico’s Public Finance Corporation (PRPFC), a subsidiary of the Government Development Bank.


According to CNBC reports, the PRPFC is expected to default on the $58 million payment due to bondholders this Saturday, August 1.  According to securities attorney, Steven D, Toskes, “A default in PRPFC bond payments due this Saturday will most likely be the first of many Puerto Rico bonds to default on their scheduled interest payments.”  Mr. Toskes continued, “The Financial Industry Regulatory Authority (FINRA) investigation into UBS’ sales practices related to non-recourse loans used to invest in proprietary closed-end funds, is the focus of our law firms’ current investigations which has led to significant discoveries.”


Since the precipitous drop in August 2013, Puerto Rico bond investments have become a significant source of legal trouble for UBS. In the recent SEC filing, UBS provided guidance for the financial exposure from customer complaints so far as follows, “Customer complaints, and arbitrations with aggregate claimed damages exceeding $1.1 billion.”  Mr. Toskes explains, “We believe many investors have still not filed arbitration claims, given the fact that UBS’ purported amount of the claims filed is considerably less than the actual losses experienced by Puerto Rico investors.”


Klayman & Toskes, P.A. and Carlo Law Offices are dedicated to the rights of Puerto Rico investors.  Puerto Rico investors who suffered losses as a result of FINRA sales practice violations may be able recover their losses in a FINRA arbitration claim.  Klayman & Toskes, P.A., a leading securities law firm, practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors against major Wall Street brokerage firms.

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