Finra arbitration panel hits UBS with $9M award in Puerto Rican bond case

Feb 17, 2017 @ 3:30 pm

By Mark Schoeff Jr.

A Finra arbitration panel awarded nearly $9 million to an investor who claimed that he was hurt by the purchase of Puerto Rican municipal bonds and closed-end bond funds bonds from UBS Financial Services Inc.

The arbitrators found that UBS and UBS Puerto Rico were liable for $7.983 million in compensatory damages and $1 million in punitive damages.

The punitive damages were awarded because UBS gave the investor, Luis R. Romero Lopez, multiple loans with which he continued to buy more bonds. The arbitrators said that UBS showed "extreme recklessness and indifference to the consequences of loan recycling."

"Claimants lost more money than they would have had they been suitably invested with less leverage," the arbitration award states. The award was signed on Feb. 16.

Mr. Lopez filed his arbitration action in November 2013. The market for Puerto Rico's $70 billion muni debt bottomed out over the summer of 2013.

UBS denied the claims and also countersued Mr. Lopez for failing to repay loans. The original $9 million awarded to Mr. Lopez in compensatory damages was reduced by $1.016 million awarded to UBS, resulting in a total of $7.983 million in compensatory damages for which UBS was liable.

In December, UBS Financial Services Inc. lost an $18.6 million arbitration claim, stemming from losses to clients who invested in Puerto Rico closed-end municipal bond funds.

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