Shepherd Smith Edwards & Kantas LLP Files $15 Million Claim Against UBS Financial Services Of Puerto Rico And UBS Financial Services, Inc. Involving Financial Advisors David Lugo And Lister Rivera

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Nov 26, 2013, 10:30 ET

SAN JUAN, Puerto Rico, Nov. 26, 2013 /PRNewswire/ -- Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, http://www.ubs-taxfree-puertorico.com/, have recently filed a claim on behalf of a client who lost more than $15 million against UBS Financial Services of Puerto Rico and UBS Financial Services, Inc. (collectively "UBS").

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According to the complaint filed with the Financial Industry Regulatory Authority ("FINRA"), the client opened accounts with UBS in 2006 after selling a business. The accounts, which were managed by two UBS financial advisors, David Lugo and Lister Rivera, were supposed to be invested for moderate income and growth with a substantial portion invested for preservation of capital. Instead, as set out in the complaint, UBS and Lugo placed almost all of the account assets into low-rated Puerto Rican bonds and UBS proprietary leveraged bond funds, all of which were high risk investments.

The complaint also alleges that at the same time it was recommending and purchasing these investments for its customers, UBS was seeking to liquidate its own inventory as it deemed Puerto Rican debt "too risky." In order to protect itself and make sure its own inventory was sold before clients could sell their investments, UBS, according both to the complaint and a May 2012 settlement with the Securities and Exchange Commission ("SEC"), would reduce the price of many of the bond funds in its inventory to $.01 below the lowest customer offer, thereby always making sure its shares sold first. Once this scheme was complete and UBS was able to clear most of its inventory, the complaint alleges UBS stopped supporting the prices and the investment values fell.

To make matters worse, according to the complaint, UBS encouraged the client to borrow significant funds to purchase more Puerto Rican bonds and UBS proprietary bond funds. This was done, at first, through a "repo" account that used the equity from the Puerto Rican bonds to buy more, largely low-rated, Puerto Rican municipal bonds. Then, as alleged in the complaint, UBS extended a multi-million dollar line of credit from UBS Bank to the client so that more UBS proprietary bond funds could be purchased. This highly leveraged strategy was extremely high risk and, according to the complaint, done solely so UBS could get rid of bad investments and place them with their customers instead.

The recent ratings downgrades and concerns with the Puerto Rican economy have driven down the price of many Puerto Rican bonds since August of this year. According to the complaint, in only two months, because of the amount of leverage UBS was using and the poor quality of the investments chosen, the entire value of the accounts was lost.

Sadly, the facts in this complaint have become all too commonplace in Puerto Rico. Shepherd, Smith, Edwards & Kantas is currently representing dozens of clients that have been injured in a similar manner. Our investigation has uncovered that many UBS client accounts were over-concentrated in Puerto Rican bonds and UBS's proprietary bond funds and many more were encouraged to use leverage. Now those customers know why. If you or someone you know have lost money with UBS, David Lugo or Lister Rivera, please contact our office for a free, no obligation consultation.

Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. For more than two decades, our firm has represented thousands of investors worldwide to recover losses against major investment firms. We have represented clients in virtually every U.S. state and territory and every type of forum, including in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. More information about our work concerning Puerto Rico can also be found on our blog at http://www.stockbrokerfraudblog.com/2013/10/puerto_rico_municipal_bonds.html.

Contact Info: 800-259-9010

713-580-8914 to speak to Spanish fluent staff

Luis Acevedo [email protected]

Sam Edwards [email protected]

SOURCE Shepherd Smith Edwards & Kantas LLP