UBS Drove Reluctant Brokers to Sell High-Risk Puerto Rico Funds

Posted on March 6th, 2015 at 5:25 PM

From the Desk of Jim Eccleston at Eccleston Law Offices:

According to recordings, the selling of Puerto Rico funds were driven by the brokerage firm UBS, not its brokers. In April 2011, two years before the fund prices sank, UBS brokers were asked by the firm to sell more of the funds’ shares, even though the brokers were reluctant to do so given the funds’ low liquidity, excessive leverage, oversupply and instability. Brokers also were wary because many of the funds were loaded with debt of the Puerto Rican government and related entities that was underwritten by UBS.

Worse, the debt-loaded funds were being sold at a time when there already were fears about the size of Puerto Rico’s debt burden and the weakness of its economy.  The debt picture has deteriorated further since. The island has more public debt per capita than any U.S. state and its pension funds for government employees are severely underfunded.

 When UBS brokers expressed their views, Miguel Ferrer, then the chairman of UBS Financial Services Inc of Puerto Rico, a unit of UBS AG, told them that they either had to change their mindset or leave the firm, according to an audio recording reviewed by Reuters.  

That recording shows that UBS put its own financial interests ahead of its clients. The hundreds of Puerto Rico fund investors, who are seeking more than $900 million in damages from UBS, are not the only victims. 

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

Tags: UBS, Eccleston Law, James Eccleston, Puerto Rico

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