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D. Daxton White
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The White Law Group is a national securities fraud, securities arbitration, investor protection and securities regulatory/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. We pride ourselves on providing quality legal services to our clients and handle securities... More
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  • Securities Fraud Investigation Involving UBS Puerto Rico Fund Investments 0 comments
    Oct 8, 2013 3:05 PM

    Have you suffered investment losses in a UBS Puerto Rico Fund investment? If so, The White Law Group may be able to help you recover your losses through a FINRA arbitration claim.

    The White Law Group is investigating the liability that FINRA registered broker-dealers may have for recommending the family of UBS Puerto Rico Fund investments.

    According to the Investment News, UBS's proprietary closed-end bond funds in its Puerto Rico family of funds have suffered significant decreases in value. The Investment News' report quotes a UBS spokesperson that stated, "General weakness in municipal markets in the U.S. and Puerto Rico, and apprehension about the direction of interest rates have led to steep declines in Puerto Rico municipal bond and closed-end fund prices, and a lack of liquidity for these securities."

    According to UBS's website, here are some things of note about the Puerto Rico closed-end funds sold by the firm:

    -UBS facilitated secondary market trading since 1994 by "maintaining a trading desk that quotes a 'bid' and 'offer' price for each of the Funds, and executing transactions for customers of the Firm who want to trade . The prices quoted by the trading desk represent its judgment of the market price for each Fund." … "The Firm is not required to purchase shares of a Fund from clients seeking to sell their shares."

    -"The Firm is the dominant, and may be the sole, source of secondary market liquidity in the Fund shares. As such there may be no other source of price information for Fund shares or other purchaser of Fund shares." -Once a closed-end fund's IPO is complete, fund shares are bought and sold primarily in the secondary market; the funds themselves do not constantly issue new shares or redeem existing ones.

    -UBS Financial Services Incorporated of Puerto Rico earns a sales load of 4.75% on the initial offering of affiliated Puerto Rico closed-end funds and a portion of the sales load is paid to your Financial Advisor.

    -Investors may purchase or sell closed-end fund shares in the secondary market. Transactions in the secondary market may be made directly with UBS Financial Services Incorporated of Puerto Rico to or from its inventory. Alternatively, UBS Financial Services of Puerto Rico may match-up buyers and sellers of fund shares.

    -The market price of a closed-end fund's shares may trade at, below or above NAV. The prices provided by the UBS Financial Services Incorporated of Puerto Rico Trading Desk are based on how much buyers are willing to pay or sellers are willing to accept and how the fund is performing compared to similar investments, and not primarily by the NAV of the fund's holdings. Transactions may occur at prices different from those provided by the UBS Financial Services Incorporated of Puerto Rico Trading Desk.

    -While UBS Financial Services Incorporated of Puerto Rico currently intends to maintain a market in the shares, it is under no obligation to do so. Therefore, there may be occasions when you may be unable to sell your fund shares or may be able to sell them only at a loss or, at times, at a significant loss.

    -The prices at which trades for Puerto Rico closed-end fund shares are executed are not publicly reported.

    -Your Financial Advisor and the trading desk may earn compensation in connection with secondary market transactions you make through UBS Financial Services Incorporated of Puerto Rico. We may charge up to 3.5% of your purchase (a "mark up"), and up to 1.5% on a sale (a "mark down"). A portion of the mark up or mark down may be paid to the UBS Financial Services Incorporated of Puerto Rico Trading Desk and all or a portion may be paid to your Financial Advisor. Any mark up or mark down will increase your cost on a purchase or reduce the amount of net proceeds that you receive from a sale.

    -The UBS Financial Services Incorporated of Puerto Rico Trading Desk has order-priority handling procedures that apply to the closed-end fund shares. You should discuss these with your Financial Advisor and take them into consideration when transacting in the Puerto Rico closed-end Funds."

    Upon information and belief, it appears that UBS sold their UBS Puerto Rico Funds by highlighting the potential tax benefits. According to UBS, investors in the UBS Puerto Rico funds could "benefit from investing in securities issued by Puerto Rico Funds because they are tax exempt from Puerto Rico and United States estate and gift taxes and may provide tax-exempt or tax-advantaged income, depending on the type of fund and its investment specifications."

    Whether an investment offers potential tax advantages is not the only consideration that a brokerage firm must weigh before recommending an investment. Brokerage firms and financial advisers also have a responsibility to insure that any investment recommended made is appropriate for their client in light of the client's age, net worth, income, investment experience, and investment objectives. If a stockbroker or brokerage firm unsuitably recommends an investment, investors may have an actionable claim to recover their investment losses in a claim through FINRA dispute resolution.

    The White Law Group's investigation into the improper sales of UBS Puerto Rico closed-end funds includes, but is not limited to, recommendations to invest in the following closed-end funds:

    UBS Puerto Rico Fixed Income Fund I, Inc.

    UBS Puerto Rico Fixed Income Fund II, Inc.

    UBS Puerto Rico Fixed Income Fund III, Inc.

    UBS Puerto Rico Fixed Income Fund IV, Inc.

    UBS Puerto Rico Fixed Income Fund V, Inc.

    UBS Puerto Rico Fixed Income Fund VI, Inc.

    UBS Puerto Rico Investors Tax-Free Fund, Inc.

    UBS Puerto Rico Investors Tax-Free Fund, Inc. III

    UBS Puerto Rico AAA Portfolio Bond Fund, Inc.

    UBS Puerto Rico AAA Portfolio Bond Fund II, Inc.

    UBS Puerto Rico AAA Portfolio Target Maturity Fund, Inc.

    UBS Tax Free Puerto Rico Target Maturity Fund Inc.

    UBS Puerto Rico Mortgage-Backed & Government Securities Fund, Inc.

    UBS Puerto Rico GNMA & US Government, Inc.

    If you are concerned about your investment in UBS Puerto Rico Fixed Income Fund I or another closed-end municipal bond fund investment and would like to speak to a securities attorney about whether you have a potential FINRA dispute resolution claim, please call The White Law Group's Boca Raton, Florida office at 561-807-6804 for a free consultation.

    The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Boca Raton, Florida and Chicago, Illinois. The firm represents investors in FINRA arbitration claims throughout the United States and Puerto Rico.

    For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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