FINRA Sales Practice Violations

Conflicts of Interest

Our legal team has conducted an extensive review of Prospectuses, Offering documents, sales materials and client presentations for various Puerto Rico brokerage firms, including but not limited to, UBS Financial Services of Puerto Rico, Santander Securities, Popular Securities, Oriental Financial and Merrill Lynch (“brokerage firms”). The brokerage firms sold and marketed non-traded, closed-end Puerto Rico Bond Funds and Puerto Rico Municipal Bonds to retail investors, as underwriters of securities sold through syndication and selling agreements through other brokerage firms. Based on these documents and interviews, the law firms have concluded that undisclosed conflicts of interest exist between brokerage firms and its Puerto Rico customers.

As a result of conflicts of interest, brokerage firms and its related entities may have caused damage to Puerto Rico investors. The conflicts of interest include the management, sales and distribution of non-traded, closed-end Puerto Rico Bond Funds. In some instances, brokerage firms recommended concentrated investments in non-traded, closed-end Puerto Rico Bond Funds and Puerto Rico Municipal Bonds along with the recommended use of bank loans and brokerage account margin were the result of multiple conflicts of interest, including but not limited to some of the following:

  • Offerings targeted to Puerto Rico residents;
  • Brokerage firms acted as underwriter of Puerto Rico Municipal Bonds;
  • Brokerage firms managed and marketed proprietary closed-end funds;
  • Third-party financial relationships;
  • Municipal bond trade execution business;
  • Compensation paid to financial advisors; and
  • Business relationships between affiliated lenders.

Brokerage firms have a duty to identify potential conflicts of interest to their Puerto Rico customers, especially when it is in the pursuit of revenues by the brokerage firm and its financial advisors at their customer’s expense. FINRA rules designed to reduce the effects of any conflicts of interest relies on the full disclosure of conflicts of interest to customers as an important regulation. Brokerage firms have an obligation to disclose all material facts regarding non-traded, closed-end Puerto Rico Bond Funds, including costs and risk of loss. Brokerage firms and its financial advisors may only solicit investments suitable for Puerto Rico investors they cannot recommend the non-traded, closed-end Puerto Rico Bond Funds because it generates the highest fees and commissions for the firm. Brokerage firms involved in the management and distribution of non-traded, closed-end Puerto Rico Bond Funds should maintain effective safeguards to against sales pressures to prefer proprietary products to the detriment of customers’ interests.

Klayman & Toskes, P.A. and the Carlo Law Offices are dedicated to the rights of Puerto Rico investors. Our legal team can help you determine what steps can be taken to protect your investor rights. Puerto Rico investors who suffered losses as a result of conflicts of interest related to investments in UBS Puerto Rico Bond Funds may be able recover their losses in a FINRA arbitration claim for damages.

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Visit our Website for the Recovery of UBS Puerto Rico Bond Fund Losses

For more information on how to start a claim, or to find out if you have a meritorious cause of action, please contact our law firm, toll free, at (787) 268-6444, for a free consultation.

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