Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) and accessed on August 2, 2018 indicate that UBS Financial Services of Puerto Rico has been ordered to pay an award of $250,000 in a claim involving Puerto Rico municipal bond products.
FINRA records indicate that the claim was filed in 2016 by a group of claimants including Antonio Corretjer-Benvenutti, Roberto Corretjer-Piquer, Alberto Corretjer-Reyes, Matilde Nadal De Vidal, Inc., and the Roberto Corretjer-Piquer Retirement Plan. The claimants allege that UBS Financial Services of Puerto Rico recommended unsuitable investments, breached its fiduciary duty, over-concentrated investments, committed fraud, failed in its supervisory duties, breached contract, acted negligently, and negligently misrepresented and omitted material facts in connection to investments in Puerto Rican proprietary closed-end bonds and municipal bonds.
In their initial claim, the claimants sought rescission, compensatory damages of about $9.5 million plus interest, “well managed” account damages, disgorgement, costs, attorneys’ fees, and punitive damages, according to the award. In their hearing before a FINRA arbitration panel, they requested damages ranging from $17,315,347 (“out of pocket losses”) to $30,088,725 (“capital losses”). They also requested interest, costs, unpaid interest and dividends, attorneys’ fees (one-quarter of their recovery in the case), expenses, and costs provided for by FINRA rules, Puerto Rico and state rules, and federal securities laws, according to the claim.
FINRA’s decision, made by an all-public panel in July 2018, found UBS Financial Services of Puerto Rico liable for $250,000 in compensatory damages for the misrepresentation of material facts in connection to an investment in Puerto Rico closed-end bonds and municipal bonds.
For reference, FINRA rules and federal securities law prohibit brokers, investment adviser and broker-dealer firms from making false or misleading statements to their clients, an act known to as “misrepresentation.” They are similarly forbidden from omitting material facts concerning an investment or strategy, or the effect that those can have on the customer’s finances. A “material fact” is a piece of information that would be a significant consideration for a reasonable investor in the course of executing financial decisions. Examples include the risk level of a product, the product’s potential return, or any associated fees or commissions. Brokers, advisers and firms who misrepresent material facts may be subject to disciplinary action from FINRA, the Securities and Exchange Commission, or state authorities.