FINRA Arbitration

FINRA Investor Alert Warns Against Investing With Borrowed Funds

December 27, 2013 | Silver Law Group

FINRA, the securities industry watchdog, recently updated an Investor Alert for investors who purchase securities with “borrowed funds.” According to the alert, investments made with borrowed funds by investors grew substantially in 2013. Investors are warned that the risk of margin calls is significant and they should better educate themselves about these risks before investing with borrowed funds. Investors must understand investing with borrowed funds and the risks of a margin call, in the event, securities used as collateral decline in value. The risks investors should understand about margin calls include:

the forced sale of securities;
no prior notification required;

Hato Rey, San Juan and Guaynabo Investors in UBS Puerto Rico Bond Funds Should Consider Their Investment Recovery Options

December 20, 2013 | Silver Law Group

UBS Financial Services of Puerto Rico reported, as of December 11, 2013, another large decline in multiple proprietary closed-end bond funds managed by UBS Asset Managers. According to the Prospectus and Offering documents for the UBS proprietary closed end bond funds, UBS Puerto Rico Fixed Income Funds and UBS Puerto Rico Investors Tax Free Funds, UBS Financial Services of Puerto Rico and its financial advisors characterized the bond fund investment objective as current income consistent with the preservation of capital. For many years, UBS Financial Services of Puerto Rico and its financial advisors recommended that Puerto Rican residents maintain concentrated positions in their family of proprietary closed-end bond funds.

To enhance the yield to investors, UBS Asset Managers had the ability to leverage the investments made in the bond mutual fund portfolios up to 50% of the value of the underlying portfolio. The leverage resulted in catastrophic losses in the value of the portfolio concentrated in Puerto Rico issued securities sold exclusively to Puerto Rican residents for tax advantaged income. UBS Asset Managers had an obligation and failed to properly manage the portfolio including effective hedging strategies to protect the fixed income portfolios concentrated in securities issued in Puerto Rico.

UBS Financial Services of Puerto Rico reported the Net Asset Values for the following closed-end funds managed solely by UBS Asset Managers as of December 11, 2013:

UBS Bank Loans Created Unacceptable Risks for Puerto Rico Investors

December 20, 2013 | Silver Law Group

UBS Financial Services of Puerto Rico has received the attention of many market watchers in the media since their UBS Puerto Rico Family of Funds suffered a “meltdown” in value. What did not receive adequate media attention are UBS’ sales practices which through the zeal of its financial advisors has left Puerto Rico residents holding excessive amounts of a failed financial product, and in many instances laden with UBS Bank loans. We have learned firsthand the extent of the destruction experienced by Puerto Rican residents who have been targeted by UBS.

The UBS Puerto Rico Family of Funds, UBS Puerto Rico Fixed Income Funds and UBS Puerto Rico Investors Tax Free Funds, were designed to be sold exclusively to residents of Puerto Rico according to their Offering documents. The investment objective was tax free income consistent with preservation of capital. A closer look at the fine print deep in the Offering document tells investors a more cautious tale.

The Prospectus and Offering documents for the proprietary closed-end funds artfully disclose some of the potential risks deemed required by regulatory laws. The risks include: