Emails Prove UBS Warned of Puerto Rico Loan Practices

According to a Reuters article on Tuesday, more than two years before UBS AG made a $5.2 million settlement over Puerto Rican bond fund sales, a branch manager urged customers to engage in improper loan practices. Documents seen by Reuters show that UBS advisers told investors to use their brokerage accounts as collateral to borrow money and buy closed-end bond funds that performed poorly. UBS branch manager Carlos Capacete wrote a series of emails in 2012 and 2013 about employees at the Guaynabo UBS branch engaging in improper loan practices. Those funds lost almost two-thirds of their value between March 2011 and October 2013. The emails were addressed to regional manager Doel Garcia, and stated that Capacete urged compliance director Mariela Torres to investigate the loans in question. It is not clear as to whether Torres responded to the emails.

As of last week, the Justice Department opened a criminal inquiry as to whether customers and a UBS adviser “used non-purpose loans to invest in closed-end fund securities in violation of their loan agreements and UBS policies.” In this case, rules that limit the amount of debt that investors can use are civil, but violating the rules is a criminal matter. The bank’s $5.2 million settlement with Puerto Rico’s financial regulator for improper loan practices was settled in October. UBS also stated they would better supervise six brokers who allegedly directed their clients to borrow money to purchase the funds.

Stoltmann Law Offices represents investors from all over the country and Puerto Rico who invested money in UBS Puerto Rican bond funds. If you did so, or know someone who has, please call us in Chicago at 312-332-4200 to speak to an attorney about your options of suing UBS for investment losses. The call is free with no obligation. We take cases against UBS on a contingency fee basis only.

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