(Corrects ninth paragraph to explain that investor's loan was
secured by UBS funds, but not used to buy more of the funds)
By Suzanne Barlyn
Feb 19 Securities arbitrators have ordered UBS
AG to pay an investor $1.45 million for losses incurred by its
Puerto Rico closed-end bond funds, according to a ruling.
A Financial Industry Regulatory Authority (FINRA)
arbitration panel in San Juan, late Thursday, found two UBS
units liable in the case, which alleged securities fraud,
misrepresentation and other misdeeds, according to the ruling.
Many of the Puerto Rico funds sold by UBS were highly
concentrated in the debt of the Caribbean island's government
and related entities.
Some of the funds lost half to nearly two-thirds of their
value between March 2011 and October 2013, amid fears about the
size of Puerto Rico's debt burden and the weakness of its
economy. They have failed since to recover.
UBS is defending against hundreds of customer complaints and
arbitration claims, collectively seeking $1.5 billion in
damages, the firm said in a Feb. 2 disclosure statement on Feb
Of those, the firm has resolved $284 million in claims through
settlements or the full arbitration process, according to the
"Although the arbitrators awarded less than the full damages
the claimant requested, UBS is disappointed with the decision to
award any damages, with which we respectfully disagree," a UBS
spokesman said in a statement.
Over 20 years, the funds provided excellent returns, he
The investor, Christel Marie Bengoa Lopez, filed the case in
2014, seeking $2 million in damages. She had invested a $5
million gift she had received after her father sold his
business, according to a statement of claim.
Her UBS broker promoted the funds as safe and conservative
investments. He also suggested that Bengoa Lopez tap a
UBS-issued credit line, using her investments as collateral, to
buy an apartment. But when the funds became worth less than the
loan balance, UBS demanded payment in full.
The arbitrators, as is typical, did not provide reasons for
UBS, in September 2015, agreed to pay almost $34 million to
settle charges from the U.S. Securities and Exchange Commission
and the Financial Industry Regulatory Authority (FINRA), Wall
Street's industry-funded watchdog, that it failed to supervise
sales of the funds it sponsored to clients in the U.S.
(Editing by Bernadette Baum)