UBS Financial Services Inc. has lost a roughly $20 million arbitration award involving Puerto Rico bonds and closed-end funds, the largest penalty that the wirehouse brokerage has had to pay to date in such cases.
A Financial Industry Regulatory Authority Inc. dispute resolution panel granted investors approximately $19.8 million related to the purchase of municipal closed-end funds and Puerto Rico bonds, as well as the use of lines of credit as investment strategies in the investors' accounts. Investors included Luis Moyett, Joseph Quijano, Carmen Quijano and a handful of associated businesses.
The three-person panel awarded the investor group $14.9 million in compensatory damages, $3.9 million in attorneys' fees, $745,000 in interest and more than $215,000 in additional costs, according to the arbitration document, which was filed Oct. 19.
The investors originally sought at least $21.9 million plus interest.
"While we respectfully disagree with this decision, it is important to note that the claimants were awarded less than they sought, perhaps because for over 20 years Puerto Rico bonds provided steady and substantial returns also coupled with extraordinary tax advantages available only to Puerto Rico residents," said Maya Dillon, UBS spokeswoman.
Peter Mougey, the investors' attorney, said UBS' claim that the damages were less than sought is "categorically false." The damages he and his clients asked for at the end of the arbitration proceeding aligned with what the panel awarded, he said.
"It's to the penny of what we asked for," said Mr. Mougey, a shareholder at the law firm Levin Papantonio
UBS has had to pay several smaller awards in the recent past to investors looking to recoup money lost investing in public projects in Puerto Rico. Many have stretched into the millions of dollars, including an $18.6 million award in December 2016 that was the largest at that time.