UBS unit and former employee settle SEC and FINRA charges

The SEC has announced charging UBS Financial Services Inc. of Puerto Rico (UBSPR) 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. UBSPR agreed to settle the SEC’s charges by paying $15 million in disgorgement, interest, and penalties, which will be placed into a fund for harmed investors. The former branch officer, Ramiro L. 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 $2.8 million by having certain customers use proceeds from lines of credit with UBS Bank USA to purchase additional shares in UBSPR closed-end mutual funds.

In addition, the Financial Industry Regulatory Authority (FINRA) announced an action yesterday against UBSPR for the firm’s violation of its rules on supervision and principles of trade. UBSPR agreed to settle FINRA’s charges by paying a $7.5 million fine and interest on up to $11 million in restitution to more than 150 investors in the closed-end funds.