A unit of UBS has agreed to pay $5.2m to Puerto Rico’s financial institutions regulator over its practices involving sales of closed-end bond funds, which busted later, forcing investors to sustain heavy losses.
Under the settlement, UBS Financial Services of Puerto Rico will pay $1.7m in restitution to 34 Puerto Rico residents who invested in the funds and an additional $3.5m to an investor education fund, reported Reuters.
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The deal between UBS and Puerto Rico financial regulators will see the firm increasing its supervision of six brokers who directed their clients to improperly borrow money to buy the funds.
The probe said that the bank had allegedly arranged loans for his clients from UBS Bank USA of Utah to buy mutual funds, while the bank’s terms and conditions mention that the loans cannot be used to buy securities.
According to the settlement, the UBS brokers would have recommended and traded positions in the closed-end funds that were too large.
Rafael Blanco, Puerto Rico’s commissioner of financial institutions, said that regulators did not identify the brokers in the settlement and UBS did not admit to any wrongdoing, negligence or mismanagement.
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By GlobalDataThe latest settlement follows a routine investigation that Puerto Rico financial regulators launched in 2013that included UBS unit’s activity from June 2010 to September 2013.
