Geographic Concentration in Puerto Rico Bonds
UBS Financial Services of Puerto Rico and their financial advisors who recommended investing a substantial portion of client assets into UBS proprietary closed end bond funds concentrated in securities from Puerto Rico issuers potentially violated FINRA sales practice rules and regulations. The reason this financial advice must be avoided is investors are not compensated for the risks of exposure to catastrophic loss from investments concentration in a single type of security of geographical location. The tax free income from UBS Puerto Rico Bond Funds paid to Puerto Rico residents could never justify exposure to this level of risk from geographic securities concentration.
Financial industry standards supported by academic research support the need to avoid securities concentration, the concept of not investing all your assets in a single asset class is a foundation for what is considered suitable for all investors. UBS Financial Services of Puerto Rico failed to disclose the risks associated with the proprietary closed-end UBS Puerto Rico Bond Funds. Furthermore, some academic studies contend that securities concentration exists for any portion of a portfolio’s holding that exceeds more than 10% of the entire accounts value. The risks of securities concentration are well known and diametrically opposed to what is considered optimal for all investors, a diversified portfolio.
Any investment recommendation should consider the composition of securities held in an investment portfolio. UBS Financial Services of Puerto Rico recommendations represent stockbroker negligence, unsuitable investment advice and a failure to supervise which are violations of FINRA sales practice rules and regulations as a minimum standard of care for customer accounts.
Our team of lawyers can help you determine whether an investment loss is the result of from the failure to securities concentration and a failure to diversify a brokerage account. If an investor suffers losses as the result of securities concentration or the failure to diversify they may be able recover their losses in a FINRA arbitration claim.