Block & Landsman Investigating Claims Regarding UBS Puerto Rico Municipal Bond Funds

            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.

UBS Willow Fund's use of Credit Default Swaps Causes Investor Loss

The UBS Willow Fund, ostensibly a distressed debt fund, was a closed-ended fund recommended and sold by UBS to its clients.  This product utilized credit default swaps (“CDS”), which are essentially contracts whereby one party shifts the risk of a default onto the CDS seller in exchange for an agreed upon premium.  These are highly speculative investments.  Unfortunately for the Willow Fund, it invested in CDS involving European sovereign debt.  This gamble by UBS did not pay off, and investors are now paying the price. 

Last October, investors found out the Willow Fund, which was valued in 2006 at $500 million, was being liquidated.  As reported by the New York Times, the Willow Fund suffered losses of almost 80 percent in the first three quarters of 2012, and as a result, drastically switched investment strategy away from distressed debt, and into highly speculative CDS. 

Some UBS investors were unaware they held investments in such a speculative product, and now investors are out millions of dollars.  Investment fraud may be found on a variety of grounds, including that these investments were unsuitable for certain investors.  If you held UBS Willow Fund and believe you may have lost value in your investment due to securities fraud, please contact Block & Landsman to discuss how we may be able to assist you in recovering your assets.

Public Investment Fund Overcharged $1 Million on Dozens of Bond Trades

Brokers at UBS Securities and Morgan Stanley are alleged to have overcharged Harris County more than $1 million in the sale of new bond issues between March and September 2010. According to an investigation by the Houston Chronicle, the brokers charged the County a premium above par value for newly issued bonds of federal agencies.

The size of the Harris County, Texas investment fund, reported to exceed $4 billion, allowed for large bond purchases that generated enormous commissions for the brokers. The typical commissions for such trades range between $250 to $350 per $1 million in bonds, earning a broker a $6,250 commission on a $25 million purchase. In contrast, by charging a premium above par for new bond issues, the UBS and Morgan Stanley brokers would generate a ten-fold commission of $62,500. In and of themselves, premiums above par for bonds are not unusual, for instance when purchasing a bond paying a higher interest rate than new bonds being issued. But paying such premiums on new bond issues is extremely rare.

Public investment funds, whether belonging to municipalities or public pension funds, are responsible for hundreds of billions of dollars of taxpayer money, and can be a prime target for a wide variety of investment fraud opportunities. The attorneys at Block & Landsman are experienced investment fraud lawyers who can investigate misconduct regarding the purchase and sale of securities.