More Bad News For UBS Puerto Rico Investors

Unfortunately, investors still holding closed end mutual funds sold by UBS brokers received additional bad news today.  Moody’s Investors Service, one of three rating giants,  became the second ratings agency this week to slash Puerto Rico’s ratings to junk territory.  This move will make it far more costly for the island to raise much-needed funds and likely lead to further declines in the value of the closed end funds that are subject to dozens of FINRA arbitration claims.

We have alleged in these FINRA claims UBS knew about a significant “supply and demand imbalance” and discussed the “weak secondary market” internally. However, UBS Puerto Rico misled investors and failed to disclose that it controlled the secondary market, where investors sought to sell their shares in the funds. UBS Puerto Rico significantly increased its inventory holdings in the closed-end funds in order to prop up market prices, bolster liquidity, and promote the appearance of a stable market. However, UBS Puerto Rico later withdrew its market price and liquidity support in order to sell 75 percent of its closed-end fund inventory to unsuspecting investors. To learn about successfully suing UBS for sales practices related to the UBS Puerto Rico related funds, please call our securities fraud team.

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