The law firm of Block & Landsman is investigating claims
on behalf of investors in closed-end Puerto Rico municipal bond funds that were
created by the brokerage giant UBS Financial Services.
The closed-end
funds, which are heavily invested in the Puerto Rico municipal debt, have seen
rapid declines in value over the past several weeks. The losses were compounded for unsuspecting
investors who purchased the municipal bonds in margin accounts and who had
highly concentrated positions in these bond funds. As a result, these investors had to meet
large margin calls as the value of the bonds decreased.
UBS came
under scrutiny of the SEC last year for the sale of these bond funds. On May 1, 2012, the SEC accepted an Offer of
Settlement from the firm that resulted in a cease-and-desist order and remedial
sanctions. According to the SEC Order,
UBS personnel made misrepresentations and omissions of material facts to retail
customers regarding the market liquidity and pricing of the closed-end
funds. For example, while investor
demand was significantly declining relative to supply, UBS did not disclose
that was purchasing millions of dollars worth of the shares for its own
inventory while promoting the appearance of a liquid market with stable
prices. Subsequently, the firm
determined that its growing inventory of the funds presented a financial risk,
and it executed a plan to offer the funds for sale at prices that undercut
pending customer sell orders.
Recent
articles report the struggles affecting the bonds, including a weak Puerto
Rican economy, rising interest rates and unsustainable debt including huge
pension obligations. The ongoing
declines in the funds means that UBS customers who were encouraged to use
margin to purchase concentrated amounts of the highly leveraged closed-end
funds should consider pursuing arbitration claims before the Financial Industry
Regulatory Authority to recoup their losses.
Investigations
are ongoing in several of the bonds, including:
Tax-Free Puerto Rico Fund, Tax-Free Puerto
Rico Fund II, Tax-Free Puerto Rico Target Maturity Fund, Puerto Rico AAA
Portfolio Target Maturity Fund, Inc., Puerto Rico AAA Portfolio Bond Fund,
Puerto Rico AAA Portfolio Bond Fund II, Puerto Rico GNMA & U.S. Government
Target Maturity Fund, Puerto Rico Mortgage-Backed & U.S. Government Securities
Fund, Puerto Rico Fixed Income Fund, Puerto Rico Fixed Income Fund II, Puerto
Rico Fixed Income Fund III, Puerto Rico Fixed Income Fund IV, Puerto Rico Fixed
Income Fund V, Puerto Rico Fixed Income Fund VI, Puerto Rico Short Term
Investment Fund, Multi-Select Securities Puerto Rico Fund, UBS IRA Select
Growth & Income Puerto Rico Fund, Puerto Rico Investors Family of Funds,
Puerto Rico Investors Tax-Free Fund, Puerto Rico Investors Tax-Free Fund II,
Puerto Rico Investors Tax-Free Fund III, Puerto Rico Investors Tax-Free Fund
IV, Puerto Rico Investors Tax-Free Fund V, Puerto Rico Investors Tax-Free Fund
VI, Puerto Rico Tax-Free Target Maturity Fund, Puerto Rico Tax-Free Target
Maturity Fund II, Inc., Puerto Rico Investors Bond Fund I.
Investors
who have suffered losses due to investments in Puerto Rico municipal bond funds
should contact the securities attorneys at Block & Landsman for a confidential
and free consultation.
