I Discuss With the Wall Street Journal The Deluge of FINRA Arbitration Claims…

that will hit UBS for the sales of the closed end Puerto Rican bond funds.  The entire article can be viewed at the link below.  While 400 FINRA arbitration claims and lawsuits already filed, more are on the way. The primary claims made against UBS and Merrill Lynch are suitability claims (the investments weren’t appropriate for the investor given their age, actual investment objectives and financial resources) and  misrepresentation and omissions (the true risks were either misstated or weren’t disclosed).   To learn more about suing UBS or Merrill Lynch for Puerto Rican investment fraud losses, please call us or visit www.canisuemyadvisor.com


Another UBS Lie Exposed: “Everything Will Be OK”

Many investors victimized by sales of Puerto Rico bond funds by their Merrill Lynch and UBS brokers still haven’t come forward to sue.  Unfortunately, investors were told by their brokers that the value of the Puerto Rico bond funds would come back in value in the near to intermediate future and investors should simply be patient and wait.  Some brokers pointed to the rebound in the net asset value (NAV) of Puerto Rican bonds in the last 12 months as “proof” that things were improving and not to sue.  Unfortunately, the surge was only short lived.

Investors received a major shock when the Commonwealth passed a law recently that gave its government-controlled corporations the ability to restructure their debt. Until that point, some investors assumed that the government of the U.S. territory would stand fully behind the bonds, although there was never a promise to do so. The impact on investors who continue to hold the UBS and Merrill Lynch recommended bonds has been substantial. The benchmark Barclays High Yield Municipal Bond Index, which had been up more than 9.5 percent for the year as of mid-June – when it looked like it was going to have its best year since record-beating returns in 2009 – is now up only 5.9 percent.  The drop is expected to continue.

We encourage burned clients in Puerto Rican mutual funds recommended by UBS and Merrill Lynch brokers to contact us before the statute of limitations expires for a free analysis as to whether those losses can be recovered on a contingency fee basis.

Legal Choices For Investors In Puerto Rico Electric Power Authority Bonds

The news continues to get worse for investors in the Puerto Rico Electric Power Authority bonds.  It now appears certain investors in the bonds will have their payments postponed or canceled in coming months for an indefinite period of time.  Because of this news, the Puerto Rico Electric Power Authority bond prices continue to plummet, declining from approximately 54 cents on the dollar invested to 40 cents on the dollar.  The government owned utility charges customers more than double the U.S. average because of its poor finances, including nearly $9 billion in debt from issuing bonds to upgrade and replace power generation plants.  Cash on hand has plummeted from $200 million down to $120 million.  Long term debt of the utility has increased from $6.8 billion in 2009 to $8.9 billion in 2013.  Brokers at firms like UBS, Merrill Lynch and Banco Popular aggressively sold these bonds to many conservative, income seeking investors who were looking for the sort of stability that typically comes with utility bonds.  Many investors sold these bonds may have an actionable claim and recover investment losses through the FINRA arbitration claims process or through a lawsuit against the brokerage firm who sold them the notes.  Actionable claims could include suitability, fraud and misrepresentation and omission claims.  In order to receive a free legal analysis on whether damages can be recovered for investments in the Puerto Rico Electric Power Authority bonds, please call our investment fraud law firm to hear all contingency fee options.

Investor Case Filings UBS Bond Funds, Banco Popular & Merrill Lynch

Overall filings at FINRA are up 11% year to date through April of 2014 in comparison to last year.  The reason?  A huge surge of  arbitration filings against UBS, Banco Popular and Merrill Lynch for the losses associated with Puerto Rico related bonds.   According to FINRA, there were 1,344 arbitration claims initiated against brokerage firms and brokers compared to 1,214 for the same period in 2013.   The average time to complete an arbitration  (from filing a statement of claim through the final hearing and until an Award is issued) increased from 17.7 months to 19.0 months.  The types of claims most often brought in 2014 are:  Breach of Fiduciary Duty (alleged in 685 cases); Negligence (673); Breach of Contract (579); Failure to Supervise (559); Misrepresentation (520); Unsuitability (431); Omissions of Facts (425); Unauthorized Trading (76); Churning (66); and Margin Calls (25).  Though FINRA doesn’t break the filing down by firm, UBS, Merrill Lynch and Banco Popular have faced the brunt of FINRA claims and lawsuits related to the Puerto Rico melt down.

“Should I Sell or Hold my UBS Puerto Rico Closed End Mutual Fund”?

A big concern for UBS and Merrill Lynch clients who own bonds or bond funds with Puerto Rico debt  remains whether to continue to hold the funds or sell.  Unfortunately, it is impossible to determine what will happen with the value of these funds.  This week it was announced that Puerto Rico is contemplating more than a hundred different proposals intended to jumpstart its sagging economy – including legal prostitution and marijuana use. Considering unemployment is at 15 percent, while 45 percent of the population is living in poverty – drastic steps must be taken to improve the economy.  The question is what impact will this have on the UBS closed end funds at issue in over 200 current FINRA arbitration claims and whether clients should sell now or continue to hold the funds.  Unfortunately, it is simply too difficult to determine what the future value of these funds will be regardless of what steps are taken by the Commonwealth to improve its economy.  Many FINRA arbitrators, however, do like to see realized losses that are set or fixed prior to the hearing.  But we have recommended to our clients to speak with their new, current adviser for advice on whether to hold or sell the funds.  To learn more about securities fraud claims against UBS, please visit www.UbsBondFundFraud.com

“How Long Will My UBS Bond Fund Case Take To Resolve”?

Many current clients as well as potential clients have contacted our law firm to inquire into how long a securities arbitration FINRA fraud claim against UBS will take in terms of time. Fortunately, FINRA lifted the suspension on the cases against UBS and Merrill Lynch related to Puerto Rico bond fund losses two weeks ago.  This means FINRA arbitrators are now being appointed and the cases are moving once again.  While FINRA usually attempts to resolve cases within a 12 month period, this delay, and the surge of cases being filed (likely over 1000 claims in the next 12 months against UBS), likely means the period of time it will take for cases to resolve will be pushed back two months.  Therefore, it should take approximately 14 months from beginning to end.  To learn more, please visit www.UbsBondFundFraud.com or call us in Chicago for a no cost evaluation of your case by a lawyer.

I Discucss The UBS Puerto Rico FINRA Developmenets With Reuters…

today.  The entire story, and my analysis of the developments, can be found in the link below.  FINRA has now agreed to lift the stay and proceed with the FINRA arbitration cases filed against Merrill Lynch and UBS for the closed end fund Puerto Rico cases.  FINRA disclosed it is furiously recruiting additional arbitrators to adjudicate these cases.  Unfortunately, it is still likely given the 1000 plus cases to be filed against Merrill Lynch and UBS there will be delays in the resolution of the claims and lawsuits against these firms given FINRA’s refusal to allow cases to be heard in South East FINRA hearing locations.

Crucial Update for UBS Bond Fund Clients: FINRA Makes Decision on Venue and Arbitrators

Today FINRA issued its procedural ruling on cases for people who have filed or are planning to file FINRA arbitration claims for bond fund losses recommended by Merrill Lynch and UBS.  The entire decision is cut and pasted below.  FINRA decided the cases must be adjudicated in Puerto Rico for burned investors from Puerto Rico who dont have residences in other areas of the U.S. FINRA also decided to exapnd the arbitrator pool to include arbitrators from the South East U.S. FINRA region.  Unfortunately, FINRA did not allow Puerto Rican residents to have their cases decided in the U.S.  This will likely lead to delays as many FINRA arbitrators will NOT be willing to travel to Puerto Rico more than one time a year.  As part of the release, FINRA also disclosed UBS and Merrill Lynch agreed to pay the costs of translation services at the actual arbitration hearing. Please contact us for a detailed description as to how this will impact FINRA arbitration hearing for burned clients.

Guidance in Cases Involving Puerto Rico Bonds


Over the past several months, FINRA has received an influx of arbitration case filings relating to Puerto Rico bonds from Claimants, almost all of whom reside in Puerto Rico. As of April 7, 2014, FINRA has received approximately 209 cases involving Puerto Rican municipal securities. FINRA staff has had numerous conversations and communications with counsel for Claimants and Respondents, including an in-person meeting, concerning administration of these cases. In particular, the conversations focused on venue and expansion of the available pool of arbitrators in Puerto Rico. After considerable deliberation, FINRA has determined to issue the following guidance for the administration of these cases.

Guidance for Puerto Rico Bond Cases

Venue: FINRA will determine venue in the Puerto Rico bond cases in accordance with Rule 12213 of the Customer Code of Arbitration Procedure (the “Code”) which states in relevant part that “the Director will select the hearing location closest to the customer’s residence at the time of the events giving rise to the dispute . . . .” FINRA cases generally are venued where the customer resides, the transactions took place, and the witnesses are located. These criteria all point to Puerto Rico as the appropriate venue. Accordingly, FINRA will not modify its existing venue rule and procedures absent the agreement of the parties. Specifically, FINRA will follow Rule 12213 in assigning venue for the following reasons:

  • FINRA’s longstanding rule and policies, which were codified in 2007, were designed for the convenience and protection of customers;
  • The solicitations and transactions in these cases took place in Puerto Rico;
  • Many Claimants in these cases are elderly and travel to the continental United States would be difficult, burdensome and expensive;
  • Many Claimants’ attorneys are located in Puerto Rico and requested venue in Puerto Rico. As of April 7, 2014, approximately 62 out of 209 Claimants are represented by Puerto Rican counsel;
  • As of April 7, 2014, Claimants named individual associated person Respondents in approximately 50 of the 209 cases. Most individual associated person Respondents are located in Puerto Rico;
  • Almost all potential witnesses are located in Puerto Rico, including non-party witnesses;
  • Compelling non-party witnesses located in Puerto Rico to testify at arbitrations in the continental United States may be difficult;
  • The total expenses, including Claimant and witness travel, of requiring individuals from Puerto Rico to travel to the United States would be substantial.

FINRA will continue to allow customers with more than one residence to choose venue based on the location of any of their residences. Further, if all parties in an arbitration case agree in writing to a hearing location other than one based on the customer’s residence, FINRA will select that hearing venue.

Arbitrator Pools: FINRA will initially provide arbitrators for the cases venued in Puerto Rico from Puerto Rico and from other hearing locations within the Southeast Region and Texas. Counsel for Claimants and Respondents were in agreement that this was the area from which to seek arbitrators to expand the available roster in Puerto Rico. FINRA has expanded the available pool of arbitrators to serve in Puerto Rico from these states and FINRA will pay their travel expenses. To date, over 600 currently eligible arbitrators on the FINRA roster have agreed to serve in Puerto Rico. FINRA continues to expand the available pool of Puerto Rico arbitrators willing to serve. Additionally, FINRA is actively recruiting and training arbitrators who reside in Puerto Rico on an expedited basis. As a reminder, parties retain the option to agree to modify the provisions of Rule 12401 to have a sole public arbitrator decide their case, as opposed to a three arbitrator panel, even in cases in which the amount in controversy exceeds $100,000.00.

Interpreter Services: FINRA arbitration hearings generally are conducted in English. However, FINRA recognizes that Spanish is the primary language in Puerto Rico and that many Claimants are not conversant in English. Therefore, at FINRA’s request, UBS and Merrill Lynch have agreed to bear the costs of consecutive translation services in the Puerto Rico bond cases venued in Puerto Rico in which either is a named Respondent. FINRA is in discussions with other named Respondents to obtain their agreement to bear the cost of translation services. Customer-Claimants should make arrangements directly with UBS and Merrill Lynch’s counsel regarding translation services. FINRA is in the process of translating the Customer Code of Arbitration and the Code for Mediation into Spanish. The Codes will be available on FINRA’s website at the beginning of May 2014.

Service of Arbitrators: Counsel for Claimants and Respondents have agreed that FINRA should not limit the service of arbitrators who have previously served on a case involving Puerto Rico bonds through Award. Parties, of course, have available to them the FINRA rules on causal challenges and the Director’s authority to remove an arbitrator as set forth in Rule 12407.

Costs of Witnesses: Witness costs will be minimized by setting venue in Puerto Rico, where almost all of the likely witnesses are located. Therefore, FINRA will follow its existing rules concerning witness costs.

Disclosures: The arbitrators will be asked to answer an agreed upon set of disclosure questions submitted by the parties as part of the list selection process in order to alert the parties to possible conflicts. Please also note that any party may request additional information from an arbitrator whose name appears on the arbitrator ranking form. If a party requests additional information about an arbitrator, FINRA will request the additional information from the arbitrator, and will send any response to all of the parties at the same time.

UBS and Merrill Lynch Puerto Rico FINRA Arbitration Claims

In Investment News this week, I discuss the potential delays victims of UBS and Merrill Lynch who are contemplating filing FINRA arbitration claims against the firms might face.  The entire story can be viewed at the link below.  Since FIRNA only has 9 arbitrators in San Juan, we have been advocating for FINRA to open up the pool of arbitrators to the south east region of the U.S. and give burned investors a choice on where they want their cases to be decided.  FINRA is currently contemplating these requests and is expected to make a decision this week.


Crucial Update For Burned UBS Clients Who Bought Puerto Rico Bond Funds

We continue to prosecute claims on behalf of clients of UBS and Merrill Lynch who bought Puerto Rican closed end mutual funds and have sustained massive losses.  Today, we discussed some of the recent, crucial developments with the Chicago Tribune and Rueters in the story below.  Unfortunately, FINRA only has nine arbitrators in Puerto Rico to decide these cases.  This presents a major problem for burned investors as there will likely be over 1000 FINRA arbitration claims filed against UBS and Merrill Lynch in 2014 and 2015.  As noted in the article, FINRA is contemplating allowing cases to be filed in locations other than Puerto Rico given the impossibility of the limited number of arbitrators being able to adjudicate the pending and soon to be pending cases.  It is imperative FINRA allows this to occur so investors can have their case adjudicated in a timely fashion.