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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • LEVERAGED UBS PUERTO RICO CLOSED-END BOND FUNDS CAUSE SUBSTANTIAL LOSSES FOR INVESTORS 0 comments
    Oct 24, 2013 4:15 PM

    Investors in UBS Puerto Rico closed-end bond funds have suffered substantial losses after being forced to liquidate hundreds of millions of dollars in the funds to meet margin calls. Many of the investors were seeking tax-free income, so they sheltered millions in local municipal bond funds, which have been hit hard as the island struggles with a weak economy, rising interest rates, and significant debt loads. Investment losses were magnified because many investors were encouraged by their brokers to borrow money through credit lines to invest in the funds, which generated handsome commissions. Now, a number of investors have been forced to liquidate hundreds of millions of dollars in these funds to meet margin calls.

    UBS Puerto Rico is the island's market leader in closed-end funds, operating more than a dozen bond funds such as:

    Tax-Free Puerto Rico Fund, Inc.

    Tax-Free Puerto Rico Fund II, Inc.

    Tax-Free Puerto Rico Target Maturity Fund, Inc.

    Puerto Rico AAA Portfolio Target Maturity Fund, Inc.

    Puerto Rico AAA Portfolio Bond Fund, Inc.

    Puerto Rico AAA Portfolio Bond Fund II, Inc.

    Puerto Rico GNMA & US Govmt. Target Maturity Fund, Inc.

    P.R. Mortgage-Backed & US Govmt. Securities Fund, Inc.

    Puerto Rico Fixed Income Fund, Inc.

    Puerto Rico Fixed Income Fund II, Inc.

    Puerto Rico Fixed Income Fund III, Inc.

    Puerto Rico Fixed Income Fund IV, Inc.

    Puerto Rico Fixed Income Fund V, Inc.

    Puerto Rico Fixed Income Fund VI, Inc.

    The funds UBS manages are themselves highly leveraged. For example, the Tax Free Puerto Rico Fund II has a leverage ratio of 53 percent, meaning for every dollar of customer assets it holds, it has roughly another dollar of assets bought with borrowed money. UBS's other Puerto Rico funds are similarly leveraged and have declined between 50 and 60 percent in value. However, investors may be able to recover their investment losses by filing Financial Industry Regulatory Authority (FINRA) arbitration claims against UBS Puerto Rico that would be heard in San Juan, Puerto Rico.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

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