Jacobson Law P.A. is investigating claims on behalf of investors who invested in Puerto Rico debt — including Puerto Rico municipal bonds and closed-end funds (“CEFs”) that invested in Puerto Rico municipal bonds — through UBS Puerto Rico (“UBS”), Santander Securities LLC (“Banco Santander”), Popular Securities LLC (“Banco Popular”), Oriental Financial Services Corp. (“Oriental Bank”), and others.

There has been growing concern among regulators and investors that these firms failed to adequately disclose the illiquid nature of the Puerto Rico bonds and bond funds, the risks associated with the leverage used by the bond funds, the risk of a reduction in the dividend payments of the bonds and bond funds, the risks of concentrating investors’ accounts in Puerto Rico debt, and the credit risks associated with the bonds and bond funds due to Puerto Rico’s dismal financial and economic situation amongst other things, according to the investors.

In the Fall of 2013, Puerto Rico’s tax free bonds declined dramatically due to concerns about the territory’s faltering economy and sizeable debt. This in turn prompted money managers to sell off the Puerto Rico bonds they held at a substantial loss in September 2013, which then further depressed the value of the bonds. The decline in the bonds’ prices resulted in a corresponding increase in the bonds’ yields, which led many firms to recommend that investors purchase more Puerto Rico bonds and bond funds — even as Puerto Rico’s debt increased. By February 2014, the ratings agencies had downgraded Puerto Rico’s debt to “junk” status or speculative (i.e., below investment grade).

Notably, UBS Puerto Rico was the primary underwriter of at least 23 closed-end Puerto Rico bond funds with a total market capitalization of more than $5 billion. Many of these closed-end funds utilized leverage to bolster their performance; and many of these funds are now suffering massive losses and declining bond prices.

On May 1, 2012, the United State Securities and Exchange Commission (“SEC”) issued a cease and desist order against UBS Puerto Rico based on allegations that UBS sold mispriced funds to investors. UBS Puerto Rico agreed to pay $26 million in disgorgement and fines to settle the SEC’s charges.

On October 9, 2014, Puerto Rico’s Office of the Commissioner of Financial Institutions (“OCFI”) announced that it had reached a settlement with UBS Puerto Rico in connection with UBS’s sales of closed-end bond funds. Based on its review of UBS’s operations, the OCIF found evidence that UBS may have permitted or recommended that customers with conservative risk tolerances hold high concentrations of closed-end Puerto Rico bond funds and utilize “non-purpose” loans to purchase such funds. The OCFI also found troubling irregularities in UBS’s management and supervision of some clients’ accounts. Under the terms of the settlement, UBS will pay a $3.5 fine, $1.7 million in restitution to 34 clients and neither admits nor denies any wrongdoing.

If you invested in Puerto Rico debt, including in Puerto Rican municipal bonds and closed-end funds that invested in Puerto Rican bonds, contact Jacobson Law P.A. for a free consultation to discuss the specific facts of your case. You may have a claim and could be entitled to recover damages.