UBS, Puerto Rico Bonds & Elderly Investors

The question on many investors’ minds these days is why advisers with UBS Financial Services of Puerto Rico recommended municipal bonds that were on the brink of junk status to elderly clients. The majority of these investors had a conservative investing profile, with a low appetite for risk – which makes it all the more puzzling as to why UBS allegedly encouraged them to put their money into closed-end bond funds containing highly leveraged and risky Puerto Rican bonds.

As reported by various news outlets over the past month, the UBS Puerto Rico family of funds consisted of 14 closed-end funds that were sold exclusively through registered representatives and brokers with UBS Financial Services Inc. of Puerto Rico. UBS sold more than $10 billion of the funds through the end of 2012.

The funds in question have plummeted in value, causing many investors to watch their nest eggs and retirement savings vanish. Some of these investors are now looking at their options and filing arbitration claims with the Financial Industry Regulatory Authority (FINRA).

Meanwhile, state securities regulators are looking more carefully at Puerto Rico bond debt. Massachusetts Secretary of the Commonwealth William Galvin launched an investigation last month into sales of Puerto Rican municipal debt obligations by sending letters of inquiry to Fidelity Investments, Oppenheimer Funds, UBS and others about how much information they actually provided to buyers of the risky bonds.