FINRA Sales Practice Violations

UBS Bank Loans

UBS Financial Services of Puerto Rico (“UBS Puerto Rico”) through subsidiaries and affiliated lenders solicited the use of credit through UBS Bank Loans and brokerage account margin to Puerto Rico customers, who allege UBS Puerto Rico improperly recommended credit facilities to invest in UBS Puerto Rico Family of Funds. The recommended use of UBS Bank Loans collateralized with UBS Puerto Rico Bond Funds and Puerto Rico Municipal Bonds exposed customers to undisclosed risks and costs. UBS Bank Loan interest increased the breakeven rate of return required for the recommended investment strategy. The breakeven rate of return is increased by all costs, including commissions and margin interest. The greater the breakeven rate of return increases, the greater the assumed risk which was not disclosed to all Puerto Rico investors. The use of UBS Bank Loans and brokerage account margin secured by highly-leveraged UBS Puerto Rico Family of Funds is unsuitable investment advice.

UBS Puerto Rico Advisors Paid Incentives to Recommend UBS Bank Loans

UBS Puerto Rico provides financial incentives to its financial advisors that recommend the use of UBS Bank Loans and brokerage account margin because the bank lending is profitable to UBS Puerto Rico. Brokerage account margin loans are fully collateralized with protections provided to the brokerage firms through the terms of the margin agreements. For these profits, financial incentives are paid to financial advisors whose clients’ accounts collateralize UBS Bank Loans and brokerage account margin loans, representing a conflict of interest. Additionally, there is a financial incentive in the form of greater commissions generated through increased assets UBS Puerto Rico financial advisors can manage.

UBS Bank Loan and Margin Risk

UBS Bank Loans and brokerage account margin are unsuitable for Puerto Rico customers with investment objectives of current income and safety of principal. UBS Puerto Rico and its financial advisors should advise their customers when using UBS Bank Loans and brokerage account margin that:

  • customers can lose more money than their initial investment;
  • customers may have to deposit additional cash or securities in their account to meet margin calls;
  • customers may be forced to sell some or all of their securities to meet margin calls; and
  • UBS Puerto Rico may sell some or all of your securities for a margin call without consulting customer.

UBS Puerto Rico’s recommended use of leverage created extraordinary risks because UBS Puerto Rico Bond Funds were not actively traded and without a liquid market to sell these funds outside of UBS Puerto Rico’s Repurchase Agreement, investors were required to sacrifice their other personal assets to meet margin calls.

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 the use of UBS Bank Loans and brokerage account margin to invest in UBS Puerto Rico Bond Funds may be able recover their losses in a FINRA arbitration claim.

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Visit our Website for the Recovery of Puerto Rico Bond Fund Losses

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For more information on how to start a claim, or to find out if you have a claim, please contact our law firm, toll free, at (787) 268-6444, for a free consultation.

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