SAN JUAN, Puerto Rico, Dec. 6, 2016 /PRNewswire-HISPANIC PR WIRE/ — The Financial Industry Regulatory Association’s Office of Dispute Resolution published a record $18.5MM securities arbitration award on behalf of Puerto Rico investor Rafael Vizcarrondo against UBS Financial Services, Inc. and its Puerto Rico affiliate, UBS Financial Services, Inc. of Puerto Rico (“UBS-PR” individually, and both entities, collectively, “UBS”). Mr. Vizcarrondo, an attorney and a businessman, filed his claim in August 2014 following the collapse of the Puerto Rico municipal bond market which began in August 2013. This case was prosecuted by prominent securities and investor rights attorney Timothy J. Dennin of Timothy J. Dennin, P.C. (www.denninlaw.com) with offices in Manhattan and Northport, Long Island N.Y.
Mr. Vizcarrondo alleged in his statement of claim and during his twenty-four day arbitration hearing that UBS through it financial advisors recommended purchases of proprietary non-diversified closed-end Puerto Rico municipal bond funds (“UBS FUNDS”) that during 2012 and 2013 resulted in 97% of his UBS liquid assets being allocated into these overconcentrated products. The stated investment objectives and risk parameters for the UBS FUNDS recommended to Mr. Vizcarrondo and other Puerto Rico investors were to provide “current income” or “high income” exempt from U.S. federal and Puerto Rico income taxes “consistent with the preservation of capital.” The well known, commonly understood (in academia and by investment professionals) risks associated with the UBS FUNDS’ overconcentration of investments in a single geographic market were amplified by the internal leverage employed by the UBS FUNDS.
In August 2012, Mr. Vizcarrondo began to periodically question his UBS financial advisors about the safety of his principal invested in the UBS FUNDS. Mr. Vizcarrondo alleged that not only did UBS recommend that he hold on to his existing FUNDS positions but that he should continue to purchase additional shares of the UBS FUNDS through dividend reinvestments and new funds deposited into his accounts. Mr. Vizcarrondo alleged that UBS’s recommendations of a leveraged portfolio highly overconcentrated in Puerto Rico municipal bond issuers was unsuitable or inconsistent with his investment objective of seeking current income consistent with his articulated desire to protect his principal.
Mr. Vizcarrondo also alleged that UBS failed to disclose to him the existing, growing and specific risk of the illiquidity of the UBS Funds shares that he owned. At all relevant times during 2012 and 2013, UBS was never a market maker in the UBS FUNDS shares but a “market facilitator” assisting its customers’ sales of their shares through both firm proprietary account purchases and through arranging cross-trades with other UBS customers. Mr. Vizcarrondo asserted during the arbitration that UBS failed to disclose to him the growing risk that due to the UBS FUNDS’ low and declining daily trading volume, UBS would be unable to liquidate his large positions in certain funds over a period of multiple months.
The above-referenced FINRA $18.5MM arbitration award included compensatory damages ($12.7MM), 9% simple interest ($2.5MM), expert witness fees ($163,000) and attorneys’ fees ($3.179MM).
The case was litigated by former SEC enforcement and longtime investor rights attorney Timothy J. Dennin, Esq. of Northport, NY. Mr. Dennin’s local Puerto Rico counsel in the case included Rafael Lugo, Esq. and Joseph Marrero-Mathieu, Esq. of Lugo Sotomayor Law & Associates, P.S.C., San Juan, Puerto Rico; Jose A. Andreu Garcia and Jose A. Andreu Fuentes, Esq. of Andreu & Sagardia, San Juan, Puerto Rico; and Thomas F. Shine, Esq., Indialantic, FL.
Mr. Dennin has successfully represented numerous investors in connection their claims against UBS who sold to them closed-end Puerto Rico municipal bond funds and individual Puerto Rico municipal bonds.
For information, contact:
Timothy J. Dennin, Esq., a former Securities and Exchange Commission Division of Enforcement attorney and former assistant district attorney (New York), 631-261-0250, [email protected], www.denninlaw.com
