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Judge Denies UBS Investors’ Class Certification over Puerto Rico Funds

September 20, 2018

UBS scored a small win in the saga over its sales of products tied to Puerto Rico bonds, with a New York federal judge denying to certify a class of investors who accused the firm of failing to analyze the suitability of their investments in closed-end mutual funds tied to the bonds, Law360.com writes.

U.S. District Judge Sidney Stein ruled the investors can’t establish broad unsuitability of their collective investments in the funds, arguing that suitability would vary by individual investor since each of them had a different goal, according to the legal news website.

The investors seek to represent all UBS clients who had signed suitability agreements with the firm and purchased the mutual funds between May 2008 and May 2014, Law360.com writes.

The investors claim UBS misrepresented over 20 funds as safe investments providing tax-free income that in reality were “ticking time bombs,” according to the website.

Furthermore, Stein ruled that to determine whether UBS didn’t adequately assess suitability for each investor, and whether each investor acted on that assessment, would need to be determined on a case-by-case basis, Law360.com writes.

“A suitability determination is inherently individualized because each investor had unique circumstances and objectives including risk tolerance, cash flow and income needs, debts, net worth, total assets, tax needs, investment time horizon, asset allocation, health, and investment experience,” Stein said, according to the website.


UBS has paid out millions of dollars in claims linked to Puerto Rico municipal bonds, the market for which collapsed in 2013. In June, a Finra panel ordered the firm to pay $4.3 million to claimants who lost money in the funds. And last year, UBS lost two claims related to the bonds collectively worth $13.4 million.

By Alex Padalka
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