UBS To Let Two-Thirds Of Employees Adopt Permanent Hybrid Work

UBS To Let Two-Thirds Of Employees Adopt Permanent Hybrid Work: The move by UBS is in stark contrast with many of its U.S. rivals that are calling most workers back to the office.

UBS Keeps Losing its Attempt to Vacate $11-Mln Finra Award

Back in December 2019 award UBS lost an arbitration case brought by Mark Munizzi, a former UBS regional compliance officer in Chicago, whom the wirehouse fired in 2018. His claim was based on his allegations UBS defamed him with the language it put on his U5 form filed with the Central Registration Depository.

The arbitration panel awarded Mr. Munizzi 11 million dollars, and UBS has been appealing the decision ever since.

AdvisorHub tracks the appeals, and UBS' defeats here - https://www.advisorhub.com/ubss-appeal-to-vacate-11-mln-finra-award-faces-uphill-battle-lawyers/

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Mark J. Astarita, Esq. is a 30-year securities arbitration veteran, having represented parties in over 600 FINRA arbitrations in 20 cities. To discuss your securities law claim, call Mark at 212-509-6544.

UBS Smacked For Unnecessary Defamation of Terminated Employee - $11 Million

Punitive damage awards in arbitration are rare. I was able to obtain one against a major brokerage firm years ago for a disabled investor, but they don't happen often. However, last year a FINRA arbitration panel ordered UBS to pay $7.5 million in punitive damages to a compliance officer who claimed he was defamed when the firm terminated him. The arbitration panel also award him $3.1 million in compensatory damages, almost $497,000 in attorneys’ fees. It also required UBS to pay all but $800 of the $30,000 of hearing and prehearing session fees,

UBS moved to vacate the award, and the court denied that request, leaving the 11 million dollar award in place. AdvisorHub is reporting that UBS has appealed that decision, but if UBS loses that appeal, it will have 30 days to pay the award, or FINRA will suspend its broker-dealer license.

Defamation Claims

Defamation claims in the securities industry are difficult, and depending on the state where the employee worked, nearly impossible. Think about New York, where the highest court ruled that firms have absolute immunity in their U-5 filings - absolute, not simply conditional. Absolute, as in you can't sue them for a defamatory filing.

While that is not 100% true, and knowledgeable attorneys have filed successful claims in New York for false U5 filings, the point is - it is not easy.

And that is true in most jurisdictions. Forms U4 and U5 are government required filings, and one of the requirements of Form U-5 is to state the reason that a broker's employment was terminated. Most times there is no issue, as the broker resigned. The situation gets dicey when the broker is fired since the firm is between a rock and a hard place - its obligation to be truthful to the regulators, and being sure not to defame the broker.

The Arbitration Award

Most firms meet those obligations without controversy, but in this case, something clearly went wrong. FINRA arbitrators are not required to give a reason for their award, but a careful reading of the award tells its own story:

• $3,149,656 in compensatory damages, the EXACT amount the Claimant asked for.
• $112,500 in interest on the compensatory damages, the EXACT amount the Claimant asked for;
• $7,500,000 in punitive damages
• $496,753.36 in attorneys fees pursuant to the state wage payment act,
• Plus assessing the $30,000 of the $30,800 in hearing costs to UBS and ordering the expungement of the "Yes" answers on Form U5.

The Award doesn't provide any details of the claim, but UBS' motion to vacate the award provides some insight. The termination reason on Form U-5 stated terminated “after firm review determined that (1) he failed to adequately supervise employees in association with the risks of an uncovered options strategy in employee and employee related accounts and (2) gave varied responses during the review.”

I was not involved in the case, nor do I know anything about the case other than what is in the public filings. But I have represented dozens of brokers and compliance professionals in employment disputes. For some reason, firms have this desire to add an allegation that the employee lied to the firm as a reason for termination. In their court papers, UBS did exactly that, labeling the employee's conduct as an attempt to conceal the truth and that he presented a "shifting" story during the internal investigation.

Even in UBS' court papers the evidence of "varied responses" could reasonably be viewed as a failure to recall specific details of events that happened during the course of a day weeks later and even a month later, when interviewed by the firm. The documents do not state this, but my best guess is that the employee was called into a meeting, without notice, not told what the purpose of the meeting was, was not permitted to have an attorney present and was pressed for answers to very specific questions without his notes or files.

When he is later able to review his files he remembers facts that he did not recall during the interview,  and so advises the interviewer. UBS called this concealment and a shifting story, and having been involved in similar cases, I imagine that UBS did all it could do to establish that the employee attempted to conceal the truth.

Keep in mind that the employee is a supervisor. He did not place the trades, he is was accused on not supervising the trades and of not advising the customers of the risks involved. That is, at worst, negligence, and a grounds for termination. Not good grounds, but enough to support a termination for cause.

But UBS, and other firms, are not satisfied with that, they want to make sure the termination sticks, so they add allegations that the employee attempted to conceal his negligent conduct.

Problem is, that makes him unhireable anywhere else. The negligence is bad enough.

And apparently the arbitrators saw the conduct for what it was, and it cost UBS 11 million dollars.

UBS Desperate to Keep Clients

According to an article in AdvisorHub, UBS Orders Fee Waivers, Loan Discounts on Reassigned Accounts, UBS is drastically waiving fees and commissions for accounts of brokers who have left the firm, in a desperate attempt to keep those clients, and their assets.

The fee waiver is causing concern for brokers who are planning on leaving, as well as for the brokers who would normally welcome the reassigned accounts, who will now be working for free on those accounts for at least 6 months - with the additional potential liability.

According to the article, UBS is claiming "enhanced protocols" to retain clients, and admits that the firm will contact clients of advisers who leave, notifying them that their advisory fees will be waived for the next two quarters, annual account fees waived for the year and rates on securities-backed and margin loans reduced to a Libor-plus-50 basis points.

This is not unusual, firms use fee waivers to entice clients to stay for years, but what is unusual is a firm making a blanket offer of this size, to all of a departing broker's clients, without the client requesting same, or deciding to follow the broker.

This "enhanced protocol" follows UBS' drastic move two years ago when it left the Protocol for Broker Recruiting, throwing broker recruiting back to the early days of lawsuits, injunctions and temporary restraining orders. The Protocol was put in place in large part to avoid the costs of such legal maneuvering. Firms were spending tens of thousands of dollars on legal fees, not to mention manpower, in pursuing injunctions on an expedited time frame, and were losing more of those cases than then were wining. Apparently UBS, and Morgan Stanley, who also left the Protocol, were losing too many brokers and clients, withdrew from the Protocol and started suing departing brokers.

Now UBS is offering these significant fee waivers and margin rate reductions to keep clients, which will undoubtedly be matched by the new firm, which ultimately reduces compensation for the broker.

Merrill Lynch also instituted "enhanced protocols" to retain clients from its departing brokers earlier this year.

One would think these firms would enhance their employee relations, treat their registered reps better, before they decide to leave. 

UBS Ordered to Pay Broker $1.6 Million

While her claims included a bit more, a former star broker for UBS Financial Services Inc. who was repeatedly called a "bitch" by her boss won a $1.6 million arbitration award last month.

According to InvestmentNews.com, the broker, Chrisine Carona, worked for UBS in Boston from March 2009 through July 2017 and currently is employed by Morgan Stanley. She was the top performing female adviser for UBS during that time period, ranking among the firm's top 10% worldwide, and by the time she left produced annual revenue of about $2.1 million.

The arbitrator found that UBS and the supervisor, James Ducey, retaliated against Mr. Carona after she had complained to the UBS human resources department that she was being discriminated against based on her gender. She also complained she was not receiving her fair share of client accounts of advisers who had left the firm.

Interesting note: the arbitration was not held at FINRA, it was conducted at JAMS, which is a choice in many of the employment documents we have reviewed from UBS. Brokers often want to have their cases heard away from FINRA when a wirehouse is involved. That desire comes from an undeserved belief that FINRA arbitrators do not want to enter large awards against large firms, as those firms are the ones who are most often involved in arbitrations, and hence a source of work for the arbitrators. 

In my decades of representing parties in FINRA arbitrations, I do not believe this to be the case, and have witnessed arbitrators granting large damages to investors in cases involving large brokerage firms. In fact, I once obtained an award of over 100% of my client's losses, PLUS $900,000 in punitive damages and attorneys fees - in New York, against a wirehouse.

Regardless, discrimination claims are tough to prove, but Ms. Carona had the facts and the evidence on her side.

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Mark Astarita is a nationally recognized securities attorney who represents investors and brokers in arbitration, litigation and regulatory matters across the country. Got a question? Call or email.

$730M UBS team jumps to Stifel | On Wall Street

The recruits will operate from a new Cincinnati office.

https://onwallstreet.financial-planning.com/news/730-million-ubs-team-jumps-to-stifel

Ex-UBS advisor gets 9 years in prison for $3.7M fraud | On Wall Street

The former broker bilked more than a dozen former clients over an eight-year period, prosecutors said.

https://onwallstreet.financial-planning.com/news/ex-ubs-advisor-gets-9-years-in-prison-for-37m-fraud

UBS Loses $2 Billion in Assets

AdvisorHub is reporting that UBS Wealth Management USA on Friday lost a big producer to First Republic Bank in Los Angeles.

According to AdvisorHub, the broker moved alone to First Republic’s private wealth management arm, and had generated some $6 million in annual revenue from $2 billion in client assets.

This is part of a continuing departure of brokers from UBS, despite the fact that the firm withdrew from the Protocol for Broker Recruiting, the industry agreement that allows brokers to contact their former clients when moving among member firms.

https://advisorhub.com/first-republic-nabs-6-mln-ubs-producer-in-los-angeles/

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Mark Astarita is a New York securities lawyer who represents investors and financial professionals across the country in securities arbitrations and investigations, and has been doing so for over 30 years. He has represented brokers transitioning between firms for years. Call him at 212-509-6544 or email him at mja@sallahlaw.com if you have any questions, comments or concerns regarding such matters.

UBS Apologizes For its Sneaky Move

With a questionable explanation, the firm apologizes but has not been clear about a correction.

https://advisorhub.com/ubss-naratil-hull-apologize-non-solicit-document-snafu/

UBS Quits the Broker Protocol

It looks like the Protocol for Broker Recruiting,  the agreement which put an end to expensive suits between brokers and firms, is falling apart. Having represented firms and brokers in those injunctive actions, and in the ensuing arbitrators, I know first hand that those suits are expensive, and very often, a waste of time and money.

Which is part of the reason that the Broker Recruiting Protocol was created. A copy of the Protocol is available on line, but in essence, the wire houses agreed that subject to certain limitations, a broker could leave a firm and contact his clients. That agreement removed most litigation from the broker transition process, to the benefit of firms, brokers, and most importantly, clients. After its creation in

However, last month, Morgan Stanley announced it was withdrawing from the protocol. Today, just a few hours ago, UBS announced that it is withdrawing as well.

In the announcement, the firm claimed that its priority was for current advisers to increase productivity and not recruiting adviser from its competitors.

Morgan Stanley made a similar claim, but that response only tells part of the story. If UBS is to be believed, it is going to cut back on recruiting, and therefore is not as concerned about being sued for recruiting a broker from another firm. However, the reality is that by leaving the PRotocol, UBS and Morgan Stanley are making it harder for their brokers to leave. It has little to do with UBS cutting back on recruiting. Without the Protocol,  there is nothing to stop UBS or Morgan Stanley from suing a broker who leaves,  and tying him up in litigation while he tries to change firms.

It will be interesting to see how this shakes out down the road. It seems to me that a broker who moved to UBS or Morgan Stanley has an argument that he went there relying on the representation that the firm was part of the Protocol, knowing that he would not have a litigation issue should he decide to leave.

We will see how that plays out.

UBS Ordered to Pay Florida Broker $3 Million for Defamation - AdvisorHub

The unlawful terminations of brokers, and then U-5 defamation, has been with us for decades. FINRA's decision to place unfounded, unproven and unsworn allegations on its website has only made matters worse.

UBS is probably one of the worse offenders, but that may be changing. An arbitration panel has ordered UBS to pay a former top producer in Florida $3 million for defamation as a result of its attempts to keep his clients after he left the company. The firms do this far too often. They trump up a reason to fire a broker, hold is U-5 to delay his registration at a new firm, and have the entire branch office call his clients the second he leaves the office.

Then to make sure the deal is done, the firm files a dirty U-5 which not only delays his registration at a new firm, but causes clients, and new employers, to look elsewhere.

The UBS award is reported to be one of the largest related solely to defamation and hopefully sends a message to these broker-dealers. Unfortunately in the case of UBS, it is not even a drop in the bucket.

UBS Ordered to Pay Florida Broker $3 Million for Defamation 

Broker Bests UBS on Deferred Comp

A former UBS broker instituted arbitration proceedings against UBS for failing to pay deferred compensation and bonus compensation, defamation, tortious interference with prospective economic advantage, wrongful termination, and violation of Connecticut Unfair Trade Practices Act.

The hearings took 17 days, over 10 months (who says arbitration is fast?) and UBS was ordered to pay the broker $1,369,949.00 for the deferred compensation claim and $69,231.00 for the unpaid compensation claim, plus interest at the rate of 9% per annum from July 9, 2013 until the award is paid in full - that is almost $400,000 in interest, assuming UBS does not move to vacate the award any pays right away.

But wait! There's more! UBS was also ordered to pay Claimant attorneys' fees in the amount of $868,264.00, and UBS was ordered to amend the broker's U5 to remove the defamatory statements that UBS placed on the U5.

All in all a good day for the broker, and perhaps a lesson to firms not to screw around with deferred compensation. After all, it is the broker's money, that he earned, and the firm has no moral right to manipulate a termination and to keep those funds.

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Sallah Astarita & Cox is a multi-state law firm with offices in New York, Florida and New Jersey. Because of the unique nature of the practice of securities law, the firm represents clients across the country, in virtually every state in the United States. Contact the firm at 212-509-6544.

FINRA Panel Crushes UBS in Puerto Rico Case -

UBS is defending against hundreds of customer complaints and arbitration claims, collectively seeking $1.5 billion in damages, relating to its sale and promotion of Puerto Rican bonds and funds invested in those bonds.

Having already paid over $280 million in settlements for their disaster in Puerto Rico, UBS has just been slammed by another FINRA arbitration panel, and have been ordered to pay an investor $1.4 million which included $249,000 in attorney's fees.

Puerto Rico bonds were sold to investors in Puerto Rico and in the States as safe and low-risk, tax free, investments. However, with poor economic conditions in Puerto Rico, the bonds were actually near junk levels.

While UBS is thought to be the largest broker-dealer promoting these bonds, other bond funds contain these bonds and may be the cause of significant losses for investors.

If you lost money in Puerto Rico bonds, or in your stock or bond portfolio, those losses may be recoverable. Call 212-509-6544 to speak to an experienced securities attorney at Sallah Astarita & Cox, LLC to discuss your claims and potential recovery on a contingency basis.

Related articles

• UBS Puerto Rico Investment Problems Expand 
• Pain of Puerto Rico's Debt Crisis Is Weighing on the Little Guy, Too 
• UBS Puerto Rico Bond Debacle Continues to Unfold 
• Puerto Rico Lays Out 5-Year Plan for Restructuring Its Debts 

Transition Agreements are Negotiable - Even For Credit Suisse Brokers

In October of this year, Credit Suisse announced that it was closing its retail brokerage unit and that it had signed a recruiting arrangement with Wells Fargo. That arrangement lets Credit Suisse brokers who are hired by Wells Fargo to smoothly transition their practices and clients to the Wells Fargo Advisors arm by early next year.

That agreement seemed to be a welcome solution to the recruiting issues that arise when a large number of retail brokers changed firms, but that soon changed. Wells Fargo put a cap on the upfront loan, which traditionally has been 2-3 times trailing twelve. For some brokers, their upfront loans would be more than $5 million, which is where Wells Fargo set the cap.

That cap then starts to unravel the benefit of entering into the recruiting agreement, because the brokers are not bound to deal with Wells Fargo. Brokers complained, and since firms like  Merrill Lynch, Morgan Stanley and UBS do not impose such caps. Credit Suisse brokers were encouraged to discuss relationships with those firms.

Credit Suisse brokers need to keep in mind that they are not locked into any particular deal, even if they go to Wells Fargo. Despite popular opinion, all employment deals, including transition bonuses, upfront loans and hurdles are negotiable, as demonstrated by Wells Fargo decision to modify the upfront cap for brokers who are affected, and sometimes offering $2.5 million in new deferred compensation that vests over four years.

Related Stories:

Credit Suiss Advisors Free to Move to Wells Fargo

Wells Fargo and Credit Suisse strike recruiting deal for 250 advisers

Credit Suisse brokers not happy with move to Wells Fargo

Wells Fargo-Credit Suisse Deal: First FA Out Picks Merrill

Broker Dealers Move to Banking Fueling Transitions?

Advisors Have Leverage In Employment Agreements

Reviewing Broker Transition Agreements

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Mark Astarita is a nationally known securities lawyer who has represented brokers and advisers in their transitions, loans and compensation issues for decades. He has negotiated deals, settlements and agreements with every major brokerage firm and dozens of regional firms. Mark has also represented brokers in disputes with every firm and does so in an efficient and cost effective manner. Call him for a free telephone consultation, and let’s see how I can help you. 212-509-6544 or email - mja@sallahlaw.com

Puerto Rico Bond Saga Continues - FINRA Sanctions Santander Securities LLC

The inappropriate sales and marketing of Puerto Rico bonds is not limited to UBS. Recently FINRA ordered Santander Securities LLC to pay approximately $4.3 million in restitution to certain customers who were solicited to purchase Puerto Rican Municipal Bonds (PRMBs).

The firm was also ordered to pay restitution of $121,000 and make offers of rescission to buy back the securities sold to certain customers impacted by the firm's failure to supervise employee trading.

FINRA also censured and fined Santander $2 million for supervisory failures related to sales of PRMBs and Puerto Rican closed-end funds, and for failing to reasonably supervise employee trading in its Puerto Rico branch office.

FINRA found that between December 2012 and October 2013, Santander did not ensure that its proprietary product risk-classification tool accurately reflected market risks of investing in PRMBs, and failed to adequately supervise its customers' use of margin and concentrated positions in their accounts. According to FINRA, the firm's systems and procedures did not require a review or assessment of its product risk-classification tool, used by Santander's representatives when recommending products to customers, to determine whether it factored in the changed risks of investing in PRMBs. Most notably, Santander did not review or assess the tool's PRMB risk classifications following significant market events such as the December 13, 2012, Moody's downgrade of certain PRMBs to one level above junk. The day after the Moody's downgrade, Santander stopped purchasing PRMBs that its Puerto Rican customers wanted to sell and accelerated its efforts to reduce the firm's inventory of PRMBs.

During this same time period, Santander did not have systems or procedures in place to ensure that any comprehensive review of accounts with significant concentration in Puerto Rican bonds and closed-end funds was conducted to determine whether new purchases were suitable in light of existing positions. Additionally,

FINRA found that Santander failed to reasonably supervise employee trading in its Puerto Rico office with a view toward mitigating potential conflicts of interest where customer orders were filled through positions held in their own broker's personal brokerage account. Because Santander did not have adequate systems in place, approximately 400 of these types of transactions went undetected. In concluding this settlement,

Santander neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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Sallah Astarita & Cox, LLC continues its representation of investors regarding possible sales practice abuses in connection with the sale and marketing of various Puerto Rican bond funds. Sallah Astarita & Cox attorneys have represented parties in over 750 arbitrations, more than most law firms, and are all former regulators and brokerage firm attorneys. Call our office for a free consultation at 212-509-6544.


FINRA Sanctions Santander Securities LLC $6.4 Million for Supervisory Failures Related to Sales of Puerto Rican Bonds |

Related articles

• Focus on state, not Puerto Rico 
• Obama Administration Urges Quick Action on Puerto Rico 
• Puerto Rico Seeks To Calm Rattled Muni Bond Investors 
• Sallah Astarita & Cox Reviewing Potential Claims Against Other Brokerage Firms for Investments in Puerto Rico Municipal Bonds
• UBS Puerto Rico Bond Debacle Continues to Unfold 
• Despair and Anger as Puerto Ricans Cope With Debt Crisis 
• UBS Puerto Rico Investment Problems Expand

Credit Suiss Advisors Free to Move to Wells Fargo

Wells Fargo struck a deal with Credit Suisse to smooth the recruitment of the Swiss lender's private-bank employees as their firm retreats from managing wealth for U.S. clients.

The deal would allow U.S. advisors and clients to move to Wells Fargo Advisors by early 2016, according to a joint statement Tuesday from the firms.

Wells Fargo Reaches Agreement to Add Credit Suisse Advisors

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Considering a move? All deals are negotiable. At all firms. Don't fall for the hype, you can get a better deal, and resolve your disputes with your prior firm. Call us today - 212-509-6544 - Sallah Astarita & Cox, a national securities law firm.

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• Good Markets, More Broker Transitions 
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More Structured Product Claims vs UBS? UBS Will Pay $19.5 Million Settlement

My law firm has been investigating and prosecuting structured product cases  for the last few years, many of them involving UBS. Those cases received a boost today as the SEC announced that UBS AG has agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

Structured notes are complex financial products that typically consiss of a debt security with a derivative tied to the performance of other securities, commodities, currencies, or proprietary indices. An example is Lehman Principal Protected Notes sold by UBS which were sold as low-risk investments.

The return on the structured note is linked to the performance of the derivative or the underlying security. According to the SEC, between $40 billion to $50 billion of structure notes are registered with the SEC per year, with many of those notes sold to relatively unsophisticated retail investors.

UBS, one of the largest issuers of structured notes in the world, agreed to settle the SEC’s charges that it misled U.S. investors in structured notes tied to the V10 Currency Index with Volatility Cap by falsely stating  that the investment relied on a “transparent” and “systematic” currency trading strategy using “market prices” to calculate the financial instruments underlying the index, when undisclosed hedging trades by UBS reduced the index price by about five percent.

UBS settled the claims without admitting or denying the SEC's allegations, but the Commission claims that the case is " the first-of-its-kind case involving misstatements and omissions by a structured notes issuer"  according to SEC Chair Mary Jo White.  Andrew Ceresney, Director of the SEC's Division of Enforcement.is quoted as saying this “case demonstrates the importance of being truthful in offering materials to be used in the offer and sale of structured notes to retail investors,”

Our firm has been prosecuting claims against UBS and others, for the fraudulent promotion of structured products since 2010 when the issue first came to the forefront. We continue to do so and welcome inquiries from brokers and investors who have been harmed in these products.

According to the SEC’s order instituting a settled administrative proceeding:

• UBS perceived that investors looking to diversify their portfolios in the wake of the financial crisis were attracted to structured products so long as the underlying trading strategy was transparent.  In registered offerings of the notes in the U.S., UBS depicted the V10 Currency Index as “transparent” and “systematic.”
• Between December 2009 and November 2010 approximately 1,900 U.S. investors bought approximately $190 million of structured notes linked to the V10 index.
• UBS lacked an effective policy, procedure, or process to make the individuals with primary responsibility for drafting, reviewing and revising the offering documents for the structured notes in the U.S. aware that UBS employees in Switzerland were engaging in hedging practices that had or could have a negative impact on the price inputs used to calculate the V10 index.
• UBS did not disclose that it took unjustified markups on hedging trades, engaged in hedging trades with non-systemic spreads, and traded in advance of certain hedging transactions.  
• The unjustified markups on hedging trades resulted in market prices not being used consistently to calculate the V10 index.  In addition, UBS did not disclose that certain of its traders added spreads to the prices of hedging trades largely at their discretion.    
• As a result of the undisclosed markups and spreads on these hedging transactions, the V10 index was depressed by approximately five percent, causing investor losses of approximately $5.5 million.  

The SEC’s order found that UBS acted negligently by misleading investors through material misstatements or omissions in the offering documents.

Without admitting or denying the SEC’s findings, UBS agreed to cease and desist from committing or causing any similar future violations, to pay disgorgement and prejudgment interest of $11.5 million, to distribute $5.5 million of the disgorgement funds to investors to cover the total amount of investor losses, and to pay a civil monetary penalty of $8 million.  In determining to accept the offer, the SEC considered UBS’s substantial cooperation afforded its staff and certain remedial measures UBS implemented voluntarily.

Investors who have been harmed by this conduct, will need to pursue their claims with their own counsel. For further information, contact us at 212-509-6544 or by email.

Related articles

• UBS Fined $545 Million in Forex Scandal

• UBS Puerto Rico Investment Problems Expand 

• More Fraud Charges Against UBS

• UBS Puerto Rico Bond Problems

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

UBS Puerto Rico Investment Problems Expand

UBS’ involvement in Puerto Rico investments continues to explode, as the customer arbitrations against the firm start to heat up.  UBS has confirmed that FINRA and the SEC are not only looking into the recommendations of the funds, but now they are investigating the structure of the funds.

This week UBS reported that it is facing criminal investigations into the use of non-purpose loans to invest in closed-end funds, in violation of various agreements and policies.

In 2014 UBS settled allegations with the Office of the Commissioner of Financial Institutions for the Commonwealth of Puerto Rico (OCFI) in connection with OCFI’s examination of UBS’s operations from January 2006 through September 2013. Pursuant to the settlement, UBS contributed $3.5 million to an investor education fund, offered $ 1.68 million in restitution to certain investors and, among other things, committed to undertake an additional review of certain client accounts to determine if additional restitution would be appropriate.

UBS has been defending an onslaught of customer claims from investors in its Puerto Rican bond funds, who claim that the products were improperly structured, and/or were unsuitable for the particular investor.  More information regarding the investigations and arbitration is here.

UBS has been settling the cases with its customers who are making allegations of unsuitable investments; breach of contract and fiduciary duty; negligence; and failure to supervise , as well as violation of Section 10(b) of the Securities Exchange Act, Rule 10b-5 of the Securities Exchange Commission, NYSE and FINRA rules, and the securities laws and other laws and regulations of Puerto Rico; and violation of Article 1802 of the Civil Code of Puerto Rico 31 Laws of Puerto Rico §5141, relating to the purchase and recommendation of UBS’s funds, including Puerto Rico AAA Portfolio Target Maturity Fund and a Note of the Employees Retirement System of Puerto Rico and a variety of Puerto Rico closed-end mutual funds concentrated in Puerto Rico bonds.

For the cases that UBS has not settled, it continues to lose the cases with arbitrators awarding damages to the injured investors.  Just this week a FINRA arbitration panel in San Juan awarded $250,000 to investors against UBS.

Our firm is offering to review the statements, and details regarding these investments from investors and brokers who have been involved with these securities. Call us at 212-509-6544 to see if we can be of assistance.

Firms Sanctioned for Investor Protection Rule Violations in Puerto Rico Bonds

All municipal bond offerings include a “minimum denomination” that establishes the smallest amount of the bonds that a dealer firm is allowed to sell an investor in a single transaction.  This minimum helps to protect investors and municipal issuers often set high minimum denomination amounts for so-called “junk bonds” that have a higher default risk that may make the investments inappropriate for retail investors.
Because retail investors tend to purchase securities in smaller amounts, this minimum denomination standard helps ensure that dealer firms sell high-risk securities only to investors who are capable of making sizeable investments and more prepared to bear the higher risk.
In its surveillance of trading in the municipal bond market, the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit detected improper sales below a $100,000 minimum denomination set in a $3.5 billion offering of junk bonds by the Commonwealth of Puerto Rico earlier this year.  The SEC’s subsequent investigation identified a total of 66 occasions when dealer firms sold the Puerto Rico bonds to investors in amounts below $100,000.
The agency instituted administrative proceedings against the firms behind those improper sales: Charles Schwab & Co., Hapoalim Securities USA, Interactive Brokers LLC, Investment Professionals Inc., J.P. Morgan Securities, Lebenthal & Co., National Securities Corporation, Oppenheimer & Co., Riedl First Securities Co. of Kansas, Stifel Nicolaus & Co., TD Ameritrade, UBS Financial Services, and Wedbush Securities.
For more information, see the SEC press release and order -SEC Sanctions 13 Firms for Improper Sales of Puerto Rico Junk Bonds - or call our office if you have been an investor in Puerto Rico municipal bonds. Our office is representing a number of investors in Puerto Rico with claims for losses in municipal bonds. Our attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, inc nationwide. For more information call 212-509-6544 or send an email.

Customer Hit with $80,000 in Respondents' Attorney's Fees

It is not often that a public customer is forced to pay a respondent's attorneys fees, but in a recent FINRA arbitration, that is exactly what happened.

According to the description in the FINRA arbitration award it appears that a public customer, representing herself, filed a claim against UBS for unauthorized transactions, unsuitable recommendations, negligent supervision and violation of FINRA's conduct rules, requesting 2.75 million dollars in damages. UBS denied the allegations and requested expungement for the broker.

A hearing was scheduled, and the Claimant did not appear, and did not request an adjournment. Rather than dismissing the case, the Panel took the extra step of giving the Claimant an additional week to explain her non-appearance and why her claim should not be dismissed.

Claimant did not respond, and UBS filed a request for attorneys fees and costs.

The Panel granted the request, dismissed the complaints, awarded UBS $81,000 in attorneys fees and costs of $9,000, and expunged the matter from the broker's record.

A dramatic result, but one which brings home the point that FINRA arbitrations are a serious matter, and should be treated as such. 

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Mark Astarita is a nationally recognized securities lawyer who has represented parties on over 600 securities arbitrations. If you have a question regarding a securities law issue, email your questions to mja@sallahlaw.com