After interviewing dozens of investors who suffered tremendous losses in their investments in UBS Puerto Rico’s tax free bond funds, Sonn Law Group and Aldarondo & Lopéz Bras see several common themes among these victims. Investors, for example, commonly describe sales pitches in which they were assured that the distributions from their Puerto Rico tax free bonds would not change. Such reassurances were false. Distributions from the UBS closed-end Puerto Rico tax free bonds now have decreased by approximately 25%, and it appears likely that those distributions will not recover at any point.
In addition, many investors were encouraged – even pressured – to use margin or other loans to invest in Puerto Rico tax free bonds. That is, investors used borrowed money to invest in closed-end funds which, in turn, were using borrowed money – or leverage – to make investments. When the value of the investments dropped, investors then received margin calls, which forced them to liquidate their Puerto Rico bond or closed-end bond funds in a vicious cycle of compounded risk and loss. Thus, investors who have been forced to sell their UBS Puerto Rico tax free bonds to meet margin calls have realized losses in their investments. As a result, even if the value of the Puerto Rico tax free bonds improves, investors who were forced to sell their investments at a loss see no benefit.
Many of the investors who have lost money are retired and elderly individuals, whose brokers recommended that they invest most, if not all, of their retirement savings in the UBS Family of Funds. Such concentration of retirement or other irreplaceable savings in the closed-end funds merely magnified the losses experienced by investors when concerns about Puerto Rico’s weakening economy and growing debt compelled US money managers to sell off bonds at losses, causing the value of Puerto Rico tax free bonds to plummet.
UBS dominates the island’s market through its UBS Family of Funds closed-end funds, which include: Tax-Free Puerto Rico Fund, Inc.; Tax-Free Puerto Rico Fund II, Inc.; Tax-Free Puerto Rico Target Maturity Fund, Inc.; Puerto Rico AAA Portfolio Target Maturity Fund, Inc.; Puerto Rico AAA Portfolio Bond Fund, Inc.; Puerto Rico AAA Portfolio Bond Fund II, Inc.; Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc.; Puerto Rico Fixed Income Fund, Inc.; Puerto Rico Fixed Income Fund II, Inc.; Puerto Rico Fixed Income Fund III, Inc.; Puerto Rico Fixed Income Fund IV, Inc.; Puerto Rico Fixed Income Fund V, Inc.; and Puerto Rico Fixed Income Fund VI, Inc.
Banco Santander (Santander Securities), Merrill Lynch, Raymond James, Oriental Bank and others also sold investments linked to Puerto Rico’s municipal debt.
If you invested in Puerto Rico debt and have experienced investment losses, please call us at 844-689-5754 or complete our “contact form.” Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies.