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Puerto Rico Sues UBS Over Municipal Bond Losses

October 24, 2016 Blog

Facing concerns that the territory’s pension funds could begin running out of money as soon as 2018, Puerto Rico’s retirement system has filed a lawsuit against UBS Group AG alleging that the firm is responsible for the funds’ substantial investment losses. According to Bloomberg, the funds currently hold just four percent of the assets needed to full Puerto Rico’s obligations to its pension holders.

In the lawsuit, the Puerto Rico retirement system accuses UBS Group AG of making unsuitable investments that drained the funds’ accounts. After borrowing $3 billion as part of a plan to stabilize the pension system, Puerto Rico hired UBS Group AG to reinvest the borrowed funds. However, UBS Group AG’s investments failed to cover the interest payments on the loan, further exacerbating the financial crisis in Puerto Rico. The Bloomberg report quotes an official statement from the territory claiming that UBS Group AG’s efforts produced, “negative investment income since day one.”

Interestingly, in addition to taking on responsibility for managing investment of the Puerto Rico retirement system’s $3 billion debt obligation, UBS Group AG also served as underwriter for the loan. Taking on these dual roles would be prohibited under conflict-of-interest rules that govern financial institutions in the United States.

Puerto Rico Suit Joins Claims Asserted by Individual Investors

Of course, the Puerto Rico retirement system is not the first to file suit against UBS in relation to the territory’s financial woes. The retirement system’s lawsuit comes on the heels of successful suits filed by individual investors – including hundreds of investors represented by Zamansky LLC.

For these investors, who purchased Puerto Rico municipal bonds through UBS, the issue is not the lack of pension assets in the territory directly. However, the issue is closely related, and investors face the prospect of even greater losses as Puerto Rico is forced to choose between paying its pensioners and satisfying its obligations under its municipal bonds. Puerto Rico has been defaulting on municipal bond payments, and these defaults are likely to continue unless and until the territory’s crisis gets resolved.

Did You Invest in Puerto Rico Municipal Bonds or a UBS Puerto Rico Bond Fund?

If you invested in Puerto Rico municipal bonds through UBS or one of UBS’s Puerto Rico bond funds, it is important that you make informed decisions about protecting your investment as much as possible. While President Obama recently established a financial oversight board (FOB) that is tasked with guiding Puerto Rico back to solid ground, it is entirely possible that this effort represents too little too late. If you suffered losses in Puerto Rico municipal bonds due to bad advice you received from UBS, your best (and perhaps only) option may be to hold UBS financially accountable.

Contact Zamansky LLC about Your Puerto Rico Municipal Bond Losses

If you would like more information about filing a claim against UBS for your Puerto Rico municipal bond fund losses, contact Zamansky LLC to schedule a free, no-obligation consultation. To speak with an experienced investment fraud attorney, call (212) 742-1414 or request an appointment online today.