UBS Broker Wins Expungement of 6 Puerto Rico Bonds Disputes, but 19 Remain on Record
A 19-year UBS Financial Services veteran has cleared the path to expunge from his record six client disputes over sales of closed-end Puerto Rico bond funds that collapsed in 2013 as the U.S. territory headed toward the equivalent of municipal bankruptcy.
Even if he obtains court confirmation of the expungements, Aguayo would still have 19 Puerto Rico-related ‘disclosure’ events–most of which settled for less than the damages requested–on his registration record, according to his BrokerCheck report. He joined UBS in 2002 from Morgan Stanley, where he began his brokerage career in 1997, the database said.
The Finra arbitrator noted in the filing that Aguayo had not contributed to the settlement amounts in any of the disputes at issue. In explaining his reasoning for his decision, the arbitrator placed much of the blame for the losses on “the failure by the multiple account holders to diversify” despite Aguayo suggesting they do so.
“It was not the recommendations of [Aguayo] that created these losses,” the arbitrator wrote.
A client identified as “Customer C,” the arbitrator noted, had “rejected” Aguayo’s recommendations to diversify Puerto Rico holdings and had also borrowed money to increase the investments in question. “When the market turned due to the loss of the value of Puerto Rico holdings, Customer C did not have enough to cover the margin and as a result, had to liquify most of their holdings to cover the account,” he continued.
In the case of a client identified as “Customer D,” which focused more on suitability claims, the arbitrator found that the investor’s “financial issues” were not the fault of Aguayo’s recommendations.
“When Customer D became unemployed and the Puerto Rico job market collapsed, the investment mix (which was heavily concentrated in Puerto Rico bonds due to their taxfree nature) was not helpful to Customer D, who needed income to live on,” the arbitrator wrote, noting that “most of Customer D’s portfolio was never recommended” by Aguayo. Rather, Aguayo “inherited this account from another brokerage firm and made only a few recommendations, which were suitable for Customer D,” the arbitrator wrote.
UBS had participated in the June 18 telephonic expungement hearing and supported Aguayo’s requests for expungement, while the customers in the disputes at issue did not participate, despite being notified of the proceeding, according to Finra.
Aguayo and his attorney did not respond to requests for comment on the award or if the broker would pursue expungement of any remaining related disclosures from his record.
A UBS spokesperson declined to comment on the matter.
UBS has been involved in more claims than any other bank that was operating in Puerto Rico at the time of its economic collapse, according to Securities Litigation and Consulting Group, an expert witness firm that works with investors. UBS has resolved cases representing $2.8 billion of the $3.4 billion in aggregate claimed damages that have been filed, according to the Swiss bank’s 2020 annual report released March 29.
Last month, UBS went to court in an effort to overturn a $4.8 million award in a separate Puerto Rico bonds dispute issued against the wirehouse in May by a divided panel of three Finra arbitrators. The firm alleged one of the two arbitrators who ruled against it on the largest component of the award had “seemingly intentionally” failed to disclose previous lawsuits he filed against large corporations, signaling a possible bias in favor of the claimants, according to court filings.