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UBS Financial Services of Puerto Rico (UBS) may have charged excessive markups and markdowns in the management of the UBS Puerto Rico Family of Funds and the purchase and sale of Puerto Rico municipal bonds to Puerto Rico investors. The Municipal Securities Rulemaking Board (MSRB) establishes rules relating to the determination of reasonable commissions, markups and markdowns for the purchase or sale of municipal bonds. MSRB Rule G-17 states that dealers in municipal securities, including UBS Financial Services of Puerto Rico must “deal fairly with all persons and must not engage in any deceptive, dishonest, or unfair practice.” According to MSRB Rule G-30, to determine whether a retail investor has paid an excessive markup or markdown for the purchase or sale of municipal bonds certain factors should be taken into consideration, including:

  • availability of security;
  • expenses related to execution of trade;
  • value of the service rendered to customer;
  • other compensation received by UBS; and
  • overall profits derived by UBS.

As a general rule, the MSRB holds that transactions in Puerto Rico municipal bonds are considered to have been executed at a reasonable price, if the bond’s yield on the transaction at issue is comparable to other municipal securities of a similar:

  • Credit Rating Quality;
  • Maturity Date;
  • Call to Maturity Date;
  • Coupon Rate; and
  • Transaction Block Size.

According to MRSB Rule G-17, UBS Financial Services of Puerto Rico, as an Underwriter of municipal securities has a duty to deal fairly with Puerto Rico issuers and investors (both retail and institutional). Historically, retail investors represent a significant portion of the total investments made in tax free municipal securities. MSRB interpreted the conduct rules applied to retail investors to include disclosure of all material information concerning a specific municipal bond, at or prior to a purchase or sale, that is reasonable accessible from securities industry sources. The required disclosures include: a complete description of security features; issuer information concerning credit quality and economic information related to the issuer which is necessary to fully assess the risks of the municipal security and a reasonable price.

Our team of lawyers can help you determine whether an investment loss is the result of excessive markups and/or markdowns in a brokerage account. If an investor suffers losses as a result of excessive markups and/or markdowns they may be able recover their losses in a FINRA arbitration claim.