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September 30, 2015updated 04 Apr 2017 1:35pm

SEC, FINRA fine UBS $34m over sales of risky Puerto Rican mutual funds

US regulators have fined Swiss banking giant UBS nearly $34m for selling risky Puerto Rico bond funds, which plunged in value in recent years, to conservative clients.

By Verdict Staff

US regulators have fined Swiss banking giant UBS nearly $34m for selling risky Puerto Rico bond funds, which plunged in value in recent years, to conservative clients.

UBS Financial Services Inc. of Puerto Rico will pay $15m to the Securities and Exchange Commission (SEC) and another $18.5m to the Financial Industry Regulatory Authority (FINRA).

The regulators charged UBS Financial Services Inc. of Puerto Rico and a former branch manager for failing to supervise a former broker who had customers invest in UBSPR affiliated mutual funds using money borrowed from a UBSPR affiliated bank.

UBSPR and the bank prohibited using such loans to purchase securities and the practice exposed investors to losses while producing profits for the former UBSPR broker, the SEC alleged.

The former branch officer, Ramiro Colon III, agreed to a settlement in which he will pay a $25,000 penalty and be suspended from a supervisory role for one year.

Separately, the SEC filed a complaint in federal court in Puerto Rico against Jose Ramirez, Jr., a former registered representative in UBSPR’s Guaynabo branch office.

The SEC alleges that Ramirez increased his compensation by at least $2.8m by having certain customers use proceeds from lines of credit with UBS Bank USA to purchase additional shares in UBSPR closed-end mutual funds.

"To evade detection, Ramirez allegedly instructed the customers to transfer money from their line of credit to an outside bank account before depositing the funds into their UBSPR brokerage account and purchasing the closed-end funds," the SEC said in a statement.

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