UBS Puerto Rico remains on the hook for bond practices


Claims against Union Bank of Switzerland (UBS) Puerto Rico’s closed-end bond practices continue to arise years after the initial crash of 2013. Since that time, the bank has paid tens of millions of dollars to both regulatory agencies and individual investors.


Fraudulent practices

UBS Puerto Rico was at one point the largest wealth management business on the island. The institution acted as the underwriter of closed-end funds since the 1990s.

However, the bank’s practices regarding these funds became the cause of serious trouble when the funds rapidly deteriorated in value in 2013. The company allegedly misrepresented the funds to investors, claiming that they were low-risk investments.

The bank also took advantage of a previous legal loophole that exempted the funds from registration with the Securities and Exchange Commission (SEC).

New developments

The financial firm has settled with various regulatory agencies for tens of millions of dollars—including paying the SEC $15 million and FINRA $18.5 million in 2015. They have also been the defendant for many private lawsuits.

However, the company still faces consequences for these practices. In March, a former broker was sentenced to serve a year and one day in jail for schemes involving the purchase of securities. The broker also claimed that he was not the only one to engage in the practice.

In May, the bank itself was ordered to pay $7.8 million to a private party for their handling of closed-end bond funds.

What this demonstrates

While UBS certainly was the largest financial institution involved in the financial scandals of Puerto Rico, they were not the only one. These recent developments show how widespread fraudulent practices may have been for financial institutions in the territory. They also demonstrate that it is not too late to seek damages for securities law matters in Puerto Rico.