In one claim already filed by stock fraud lawyers, the claimant, one of Lugo’s clients, seeks to recover approximately $15 million. According to the allegations in this claim and others, Lugo reportedly recommended that his clients invest significant portions of their accounts in UBS proprietary Puerto Rico municipal bond funds and Puerto Rico municipal bonds. In addition, the amount invested frequently represented large concentrations of the total net worth of the client. Reportedly, these investments were marketed and sold as low-risk and clients were told they would be paid high, tax-advantaged dividends.

Lugo’s clients also allege that they were not warned that the UBS bond funds were highly leveraged. Lugo also allegedly recommended a UBS margin account in order to borrow funds to increase his clients’ Puerto Rico municipal bond investments. While this investment strategy was highly speculative and posed a high risk of principal loss, Lugo allegedly did not warn his clients of the risks and made unsuitable recommendations.

Reportedly, UBS Financial Services offered to buy back some shares of the Puerto Rico closed-end bond funds last month, following the funds’ significant decline in value. However, the shares will be repurchased at net asset value or below and a cap has been placed on the fund to prevent any more than 25 percent of the outstanding shares to be repurchased. According to securities fraud attorneys, the buyback program may be an attempt to discourage individual arbitration claims and actual investor recovery could be much lower than the shares’ net value.

If you suffered significant losses in UBS Puerto Rico bond funds because of the unsuitable recommendations of David Lugo or another UBS representative, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.netfor a no-cost, confidential consultation.

Both Standard & Poor and Moody had already put Puerto Rico’s general obligation municipal bonds on negative watch when Fitch Ratings joined them on November 14. The Puerto Rico bonds are already rated by all three agencies at just one step above “junk,” or non-investment grade. Currently, Puerto Rico has outstanding debt amounting to around $11 billion in this category, and securities arbitration lawyers say that the negative watch given to the bonds by all three rating agencies is an indication that the debt will likely be downgraded in the coming months to junk-bond status.

If these bonds are downgraded to junk status, the resulting flood of sales could cause another drastic drop in the bonds’ price, and could also result in losses in closed-end mutual funds invested in the bonds. Unfortunately, most buyers are unwilling to accept the risk of purchasing these bonds unless significantly discounted, leaving many investors forced to keep the investment or sell it at a significant loss.

Some of the funds currently being investigated by investment fraud lawyers are:

• Puerto Rico Mortgage Backed & U.S. Government Fund
• Puerto Rico Fixed Income Funds I-VI
• Puerto Rico AAA Portfolio Bond Funds I and II
• Puerto Rico AAA Portfolio Target Maturity Fund
• Puerto Rico Investors Bond Fund II
• Puerto Rico Investor’s Tax-Free Funds I-VI
• Puerto Rico GNMA & U.S. Government Target Maturity Fund
• Puerto Rico Tax-Free Target Maturity Fund I and II
• Tax-Free Puerto Rico Target Maturity Fund
• Tax-Free Puerto Rico Funds I and II

If you suffered significant losses in funds invested in Puerto Rico bonds through UBS Financial Services or another financial advisor, you may be able to recover your losses through FINRA securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.