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Former UBS Broker Gets a Year in Prison over Puerto Rico Bond Sales

March 28, 2019

A federal judge in Washington, D.C., has sentenced a former UBS broker to a year in prison for his scheme peddling the firm’s proprietary funds investing in Puerto Rico bonds, according to news reports.

Jose Ramirez pleaded guilty to criminal fraud in November for his role in a scheme to fraudulently use credit lines to buy securities, CNBC.com writes. From January 2011 through September 2013, the former broker told clients to borrow money so they could invest in UBS Puerto Rico bond funds, which netted him around $1.2 million in commissions, the TV news channel’s website writes, citing case documents.

Ramirez’s scheme was exposed by the 2013 collapse in Puerto Rico bonds, which in turn led to sharp declines in the value of the bond funds, forcing many clients to sell the funds to meet maintenance calls, CNBC.com writes. UBS terminated Ramirez’s registration with the firm in January 2014 after an internal investigation which found that he spurred on his clients’ improper conduct and then didn’t answer truthfully when questioned by management about it, a spokesman for the firm tells the website in an emailed statement. Finra barred Ramirez in May 2014 for failing to respond to its request for information, according to BrokerCheck.

Ramirez asked Senior U.S. District Judge Thomas Hogan of the U.S. District Court for the District of Columbia for leniency during his sentencing and received it: he faced up to 33 months in jail, but was given only a year and a day in prison, two years of supervised release and a $500 fine, CNBC.com writes. The former broker said in his sentencing memorandum that UBS was well aware of the scheme to encourage loans to buy securities among its staff, and issued letters to at least seven advisors related to the scheme, according to the website. Ramirez is the first employee of UBS Puerto Rico to get any jail time for the scheme, the website writes.

UBS itself has paid out millions of dollars related to the sales of Puerto Rico bond funds. In October 2015, the firm was fined $18.5 million by Finra and a further $15 million by the SEC related to infractions in the sales of the funds. And Finra arbitration panels have also ordered UBS to pay millions of dollars to claimants who alleged losses in the funds.

By Alex Padalka
  • To read the CNBC article cited in this story, click here.