NEW YORK, USA — The securities arbitration law firm of Klayman & Toskes announced on Thursday that it is investigating the sales practices of UBS Financial Services of Puerto Rico (UBS) in connection with the sale of Puerto Rico closed-end bond funds, as well as the losses sustained by investors in these funds.
According to The New York Times, some UBS customers were encouraged to buy securities on lines of credit in violation of the brokerage firm’s policy. Additionally, many clients took out margin loans to buy into these funds.
With many of the bond funds already highly leveraged themselves, in some cases as high as 53%, losses can be exaggerated when the value of the funds decline.
Now, many UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds after incurring margin calls.
As a result of the losses, securities arbitration claims have already begun to be filed with FIRNA’s arbitration department to recover losses on behalf of Puerto Rico closed-end bond fund investors.