UBS Financial Services(UBS) - Get Report must pay a prominent Puerto Rican businessman and his wife $15.2 million in compensatory damages and interest related to their losses in closed-end Puerto Rico bond funds, a panel of arbitrators at the Financial Industry Regulatory Authority ruled on Dec. 2.
It's "clearly the biggest award ever" among a string of similar arbitrations brought against UBS for losses in Puerto Rican fixed-income securities, said Timothy Dennin, a Northport, N.Y., lawyer who was on the couple's legal team, in a telephone interview.
The ruling by three San Juan arbitrators, published on Finra's website, came after 50 hearing sessions held between March and October of this year. The investors had said that they had been put into unsuitable investments and that UBS had failed to properly supervise their broker, among other allegations.
In a statement, UBS spokeswoman Marsha Askins said that, although the arbitrators awarded less than the full damages requested by investors Mercedes Imbert De Jesus and her husband, Rafael Vizcarrondo, the firm was disappointed and strongly disagrees with the decision.
"Mr. Vizcarrondo was an experienced investor who made a fully informed decision to concentrate his portfolio in UBS Puerto Rico closed-end funds because of their long history of providing excellent returns and substantial tax advantages," the statement said. "UBS is considering its options to overturn the award."
In its response to the 2014 complaint, UBS said that the couple had gained $5 million overall in accounts that in some cases they'd had for decades. In a financial statement that UBS attached to its response, Vizcarrondo's net worth was calculated at $48 million.
Vizcarrondo, 80, is of counsel to the San Juan law firm Fiddler, Gonzalez & Rodriguez, where he was formerly managing partner. He is well known in the Puerto Rican business community. The Harvard-educated lawyer owns or has interests in the insurance and real estate industries, among other areas.
Along with compensatory damages, the panel said that UBS must pay another $3.3 million in fees to lawyers and expert witnesses.
In a filing with the Securities and Exchange Commission on Nov. 2, Zurich-based UBS said that is has been subject to $1.9 billion in claims related to Puerto Rico municipal bonds and closed-end funds managed or co-managed by the firm in Puerto Rico. Already, the firm has paid out $740 million to claimants, the filing said.