Psychology of a UBS Puerto Rico Bond Fund Fraud Victim

Many victims of financial fraud suffer great mental and emotional harm, as well as stress-related physical effects, in addition to their financial losses. Some of the UBS clients who purchased closed end Puerto Rico mutual funds fall into this category. Some of the UBS victims represented by our law firm in FINRA arbitration claims lost a substantial part of their life savings that took decades to build up in Puerto Rico. They feel robbed of not only their money, but also their security, their self-esteem, and their dignity. They may spend years trying to recover from these actions.

In past securities fraud cases we’ve handled, many of our clients detail their victimization as a “psychological mugging.” They have described their experience as “like being raped” and often experience the same loss of trust as sexual assault victims. Fraud victims may also experience: guilt; self-blame (often extremely high); shame; disbelief; anger; depression; sense of betrayal; sense of violation; isolation (“suffering in silence”); social indifference; social stigma (“victim-blaming”); loss of faith in the world and the system that was supposed to protect them; financial problems (due actual monetary losses, lost work, and/or identity theft); health problems (related to stress)

Financial fraud victims sometimes lack support from family and friends, who blame them or make fun of them for their gullibility. If a victim is elderly, family members may begin to doubt the senior’s ability to manage his or her financial affairs. This may result in the senior losing control over his or her finances and a loss of financial freedom. Fearing blame, many fraud victims do not disclose their fraud victimization to others, suffering alone or simply taking their loss and moving on. This can lead to isolation and depression.

In the profiling of fraud victims (comparing known victims of fraud to non-victims) certain trends emerge. Many of these traits are similar to those of the UBS clients we are representing who are suing UBS. For example…

-Investment fraud victims are more likely to be financially literate, married, male, have a college degree or more, earn $75,000 per year or more, and are more open to persuasive appeals;

-When asked simply, only 10-20% of investment fraud victims would acknowledge having been defrauded

-The secondary study of just investment victims was able to attain 62% acknowledgement using a series of progressive, investment-specific questions (p. 150).

-Investment fraud victims score high on financial literacy tests than non-victims. A major hypothesis going into the survey was that investment fraud victims do not know as much about investing concept as non-victims and would therefore score lower on financial literacy questions. In fact, the study found the exact opposite: investment fraud victim scored high tan non-victims on eight financial literacy questions.

-Investment victims are demographically quite different than non-victims. The present study finds that investment victims tend to have a difference demographic profile than the general population. Among them are gender (more men than women), living situation (less alone), marital status (more married), educational attainment (more educated), and income (higher levels of income).

-Investment fraud victims are more likely to listen to sales pitches. The literature on consumer fraud suggests fraud victims may make themselves vulnerable by their willingness to listen to sales pitches.

-Investment fraud victims are more likely to rely on their own experience and knowledge when making investment decisions. Earlier studies found that investment fraud victims tended to have a personality that was very self-reliant and self-deterministic. One study found investor victims had a higher “internal locus of control.” Meaning they felt their fate in life was all up to them.

-Investment fraud victims experience more difficulties from negative life events than non-victims. The study found that investment fraud victims do in fact experience more negative life events than non-victims. This finding supports the proposition that the presence of such life stress might contribute to an individual’s vulnerability to being victimized by fraud.

-Investment fraud victims are more optimistic about the future. In terms of psychological outlook, investment fraud victims were more optimistic than non-victims by virtue of their tendency to disagree with the statement, “in spite of what people say, the lot of the average person is getting worse, not better.

-Investment victims dramatically under-report fraud. The rates of self-identification ranged from a low of 20% to a high of 60% of respondents admitting they had been taken. This research affirms previous findings that surveys asking people to self-report their experiences as victims of fraud are likely to record rates significantly below the actual rates experienced due to under-reporting.

To learn more about suing UBS for Puerto Rican bond fund losses, please see www.ubsbondfundfraud.com.

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