FINRA Sales Practice Violations

UBS Violations of FINRA Rules

UBS Financial Services of Puerto Rico (“UBS Puerto Rico”) is a member firm of the Financial Industry Regulatory Authority (FINRA). FINRA is charged with the responsibility to resolve disputes between Puerto Rico investors and UBS Puerto Rico concerning the sale of proprietary UBS Puerto Rico Family of Funds and Puerto Rico Municipal Bonds. FINRA has established rules and regulations for the standards of care required for the handling of Puerto Rico customer accounts. Klayman & Toskes, PA and the Carlo Law Offices (“law firms”), represent Puerto Rico residents in arbitration claims for damages against UBS Puerto Rico for violations of FINRA sales practice rules and regulations.

The law firms assert on behalf of clients that, UBS Puerto Rico failed to comply with FINRA sales practice rules and regulations concerning investments in proprietary UBS Puerto Rico Family of Funds and Puerto Rico Municipal Bonds. The law firms’ lawsuits on behalf of clients claim that UBS Puerto Rico misconduct resulted in legal causes of action for damages for many of the following FINRA sales practice violations:

Unsuitable Investment Advice

UBS Puerto Rico is responsible to recommend a particular investment and/or investment strategy that are suitable for Puerto Rico investors. The suitability of an investment is based many factors including an investor’s age, employment status, tax status, education, investment experience, investment objectives and risk tolerance. Investment losses in proprietary UBS Puerto Rico Family of Funds and Puerto Rico Municipal Bonds that are the result of unsuitable investment advice can be a cause of action in a FINRA arbitration claim for damages. Read more.

Conflicts of Interest

UBS Puerto Rico is responsible for the sales and marketing of the UBS Puerto Rico Family of Funds, proprietary closed-end mutual funds invested in Puerto Rico municipal bonds. As a result, UBS Puerto Rico has an affirmative duty to identify and disclose any potential conflicts of interest to their retail customers. In particular, potential conflicts of interest for any activities related to the generation of revenues by UBS Puerto Rico and its financial advisors that is charged to their customers. FINRA rules designed to reduce the effects of any conflicts of interest relies upon full disclosure of conflicts of interest to customers as an important tool. The law firms assert that UBS Puerto Rico failed to disclose all the relevant facts and these failures resulted in damages to Puerto Rico investors. Read more.

Misrepresentation or Omission of Material Facts

UBS Puerto Rico is required to make full disclosure of all material information related to their proprietary UBS Puerto Rico Family of Funds. When UBS Puerto Rico financial advisors fail to disclose all of the material facts related to UBS Puerto Rico Family of Funds they may be held liable for losses sustained from the recommended investments. The law firms alleged that material information was not disclosed including, but is not limited to, all costs and risks associated with investments in UBS Puerto Rico Family of Funds. Read more.

Concentration in Puerto Rico Municipal Bonds

UBS Puerto Rico recommended that Puerto Rico customers maintain concentrated investments in their own proprietary Puerto Rico Family of Funds. These recommendations resulted in poorly diversified portfolios that subject Puerto Rico investors to risks of individual Puerto Rico issuer default and the Puerto Rico economy. Investment losses in UBS Puerto Rico Family of Funds that are the result of a recommended concentration in Puerto Rico Municipal Bonds may be a cause of action in a FINRA arbitration claim for damages. Read more.

UBS Bank Loans

UBS Puerto Rico recommended the use of UBS Bank Loans and brokerage account margin through subsidiary banks or bank affiliates. The use of borrowed funds increases the risks associated with any investment strategy which must be clearly understood by customers and fully explained by UBS Puerto Rico and its financial advisors. After review of documents and client interviews, the law firms conclude that UBS Puerto Rico failed to disclose the risks associated with UBS Bank Loans and brokerage account margin to its customers. Furthermore, UBS Puerto Rico failed to adequately explain that during market declines, account equity declines rapidly. In most instances, Puerto Rico investors are unable to meet margin calls which require additional deposits of cash or the sale of securities at a significant loss. The recommended use of UBS Bank Loans and brokerage account margin that resulted in substantial losses may be a cause of action in a FINRA arbitration claim for damages. Read more.

Excessive Markups/Markdowns

UBS Puerto Rico is required to refrain from excessive markups and markdowns for the purchase or sale of municipal bonds. UBS Puerto Rico must deal fairly with all persons and must not engage in any deceptive, dishonest, or unfair practice. After review of documents and client interviews, the law firms conclude that UBS Puerto Rico has failed to provide Puerto Rico customers with accurate information concerning markups/markdowns, credit quality and economic information related to recommended municipal bonds which is required to fully assess the risks of the municipal bonds. Read more.

Failure to Supervise

UBS Puerto Rico is responsible for the supervision of all the activities of its financial advisors related to the investment management, sales and marketing of the non-traded, proprietary UBS Puerto Rico Family of Funds. The failure of a UBS Puerto Rico to adequately supervise the activities of financial advisors is a violation of FINRA sales practice rules and regulations which may be a cause of action in a FINRA arbitration claim for damages. Read more.

Breach of Fiduciary Duty

Puerto Rico investors relied on UBS Puerto Rico for more than trade execution, but for financial advice. When Puerto Rico investors rely upon the direction and advice from UBS Puerto Rico and its financial advisors, a fiduciary relationship is created. A fiduciary relationship requires that UBS Puerto Rico has an obligation to place the investor’s best interest before that of the firm. The subordination of financial advisors’ self-interests requires the utmost diligence when making investment recommendations. Investment losses that are the result of UBS Puerto Rico’s breach of fiduciary duty can be a cause of action in a FINRA arbitration claim for damages. Read more.

Negligence

Brokerage firms and their financial advisors are considered negligent when they fail to adhere to securities industry standards for the handling of customer accounts by not act as a reasonable and prudent financial advisor would have acted, and as a result of the negligent act or omission, the customer sustains investment losses. Brokerage firms make representations to the investing public concerning their financial expertise and the ability to manage investment accounts through media relations, advertising and publications. Investors are considered reasonable for the trust they place in brokerage firms when they laud their financial expertise. Read more.

Why Pursue a FINRA Securities Arbitration Claim?

According to FINRA, unsuitable investment advice, securities concentration, failure to supervise the activities of financial advisors, and fraudulent misrepresentations and omissions of material facts are among the claims that are available to investors against UBS Puerto Rico and their financial advisors in a securities arbitration claim filed with FINRA.

Klayman & Toskes, PA and the Carlo Law Offices are dedicated to the rights of Puerto Rico investors. Our legal team can help you determine what steps can be taken to protect your investor rights. Puerto Rico investors who suffered losses as a result of FINRA sales practice violations committed by UBS Puerto Rico and its financial advisors may be able recover their losses in a FINRA arbitration claim.

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