The client is an 80 year old retiree living alone in San Juan, Puerto Rico. He was introduced to the UBS Puerto Rico broker 10 years ago, believing at the time that the broker worked for Oriental Financial Services, Corp. Upon the recommendation of the broker, the client purchased a Sunlife annuity from him and held that annuity for many years. Thereafter, the UBS Puerto Rico broker solicited client to make other investments, but the client had a long standing relationship with a Santander Securities and later Popular Securities broker and declined the stockbroker’s solicitations until last year.
In Spring 2013, the UBS Puerto Rico broker persuaded the client to review his Popular Securities investment portfolio, discussing the substantial losses he had suffered because of his prior stockbroker’s recommendation. The UBS Puerto Rico broker then pointed to the client’s investment in Puerto Rico Commonwealth Aqueduct & Sewer Authority (PRASA) bonds and claimed that the client would suffer huge losses if he continued to hold them.
The UBS Puerto Rico broker convinced the client to open an account at UBS Puerto Rico, sell his annuity, withdraw his bank savings, and transfer Popular Securities account assets and the PRASA bonds to UBS Puerto Rico and to sell his Scotiabank CDs to invest at UBS Puerto Rico. Although the UBS Puerto Rico broker urged the client to transfer his entire Popular Securities account to UBS Puerto Rico, he refused because of his relationship with his Popular Securities stockbroker.
Like most retirees, the client wanted to preserve his hard-earned life savings and told the UBS Puerto Rico broker that he only wanted low risk investments. The UBS Puerto Rico stockbroker assured him that the UBS Puerto Rico bond funds were safe, low risk, and would even increase his income. The stockbroker claimed that the UBS Puerto Rico bond funds had an excellent track record and that his own family had invested in them, failing to mention there might be UBS Puerto Rico conflicts of interest regarding those investments. The UBS Puerto Rico stockbroker never explained other important details about the bond funds, such as the use of leverage and the concentration of the bonds in Puerto Rico. Additionally, neither UBS Puerto Rico nor its broker ever provided the client with any prospectus, offering memorandum or other documents.
In late Summer 2013, the UBS Puerto Rico stockbroker convinced the client to transfer the rest of his investments to UBS Puerto Rico. Again, the client refused. He did, however, mention another CD he had at Scotiabank, and the stockbroker convinced him to sell it and buy more bond funds, blatantly omitting the fact that the bond funds were collapsing at that time.
Soon thereafter, the client read an article in the newspaper and became concerned about his bond fund investments, asking the UBS Puerto Rico broker about the article. The broker told him to hold them and have faith and that it was temporary, even telling him to transfer the rest of his savings to UBS Puerto Rico and buy more! Displeased, the client told the UBS Puerto Rico broker to sell everything and was told for the first time he could not sell them at all!
The client owned 3 of the 23 Puerto Rico closed-end mutual funds, namely, Puerto Rico Fixed Income Fund, Puerto Rico Fixed Income Fund II, and Puerto Rico Fixed Income Fund IV.
The UBS Puerto Rico stockbroker not only told the client to purchase all of the highly leveraged, illiquid and risky UBS Funds but to hold them when the Puerto Rico market was extremely stressed and the client’s portfolio was fully invested in Puerto Rico debt. The UBS Puerto Rico stockbroker’s actions were in violation of several FINRA Rules of Conduct.
The client is seeking rescission or compensatory damages for the losses he sustained which were the result of UBS Puerto Rico’s employees’ misconduct, including, the reckless disregard of prudent investment practices. The client also seeks lost opportunity damages, punitive damages, interest on his claim from the time it accrued, and all other costs and expenses, including legal fees.
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