Reuters reports that the predominantly older investors sued UBS in May, claiming a former broker in Puerto Rico directed clients to borrow money to buy mutual funds whose value plunged because of the commonwealth's fiscal woes.
U.S. authorities are also probing UBS for criminal fraud over the matter, lawyers representing some of the investors said in June. At issue is whether UBS executives knew proceeds from loans made by a Utah unit of the bank were used in a way that violated its own lending rules.
'Declines in the market prices of Puerto Rico municipal bonds and of UBS Puerto Rico sole-managed and co-managed closed-end funds since August 2013 have led to multiple regulatory inquiries, as well as customer complaints and arbitrations with aggregate claimed damages exceeding $600m', the quarterly report said.
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