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Ponce, Dorado, Bayamon, Arecibo and Mayaguez Investors in UBS Puerto Rico Bond Funds Should Consider Their Investment Recovery Options

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:

  • Puerto Rico Fixed Income Fund, Inc. ($3.376)
  • Puerto Rico Fixed Income Fund II, Inc. ($3.955)
  • Puerto Rico Fixed Income Fund III, Inc. ($3.778)
  • Puerto Rico Fixed Income Fund IV, Inc. ($4.861)
  • Puerto Rico Fixed Income Fund V, Inc. ($4.263)
  • Puerto Rico Fixed Income Fund VI, Inc. ($5.186)

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

  • Puerto Rico Investors Tax-Free Fund, Inc. ($3.95)
  • Puerto Rico Investors Tax-Free Fund II, Inc. ($3.80)
  • Puerto Rico Investors Tax-Free Fund III, Inc. ($4.20)
  • Puerto Rico Investors Tax-Free Fund IV, Inc. ($3.69)
  • Puerto Rico Investors Tax-Free Fund V, Inc. ($4.05)
  • Puerto Rico Investors Tax-Free Fund VI, Inc. ($4.81)

In light of these developments, investors who hold UBS Managed Puerto Rico Bond Funds to consider what recourse is available to recover their investment losses.  According to the Financial Industry Regulatory Authority (FINRA), unsuitable investment advice, geographic concentration in Puerto Rico bonds, failure to supervise the activities of financial advisors, and fraudulent misrepresentations and omissions of material facts are among the potential claims that may be available to investors to recover their losses with a securities arbitration claim filed with FINRA.

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