UPDATE 2-UBS to pay $33.5 million for Puerto Rico fund abuses
(Changes headline; adds information on UBS settlement with regulators and on the SEC lawsuit)
By Nate Raymond and Suzanne Barlyn
Sept 29 (Reuters) - A unit of UBS AG on Tuesday agreed to pay almost $34 million to settle charges from two U.S. regulators that it failed to supervise the sale of Puerto Rican closed-end mutual funds it sponsored to clients in the U.S. territory.
The U.S. Securities and Exchange Commission also said it sued a former financial adviser at UBS Financial Services Inc of Puerto Rico, claiming he misled investors who bought $50 million of shares in the funds, which invested heavily in Puerto Rico municipal bonds.
Without admitting or denying guilt, the UBS unit agreed to pay the Financial Industry Regulatory Authority $7.5 million for failing to have systems that monitored whether sales were suitable to customers' risk objectives and goals. FINRA said it also ordered the Puerto Rican unit to pay about $11 million in restitution to 165 customers who lost money on the funds.
FINRA, Wall Street's industry-funded watchdog, said that UBS failed to monitor the combination of leverage and concentrations of the funds in customers' accounts.
Simultaneously, the U.S. SEC said it will collect $15 million in disgorgement, interest and penalties from UBS of Puerto Rico that will be put into a fund for investors it had harmed.
UBS spokeswoman Karina Byrne said the bank is pleased to have resolved the regulatory matters, which were initiated in early 2014.
"We remain dedicated to serving our (Puerto Rico) customers during this difficult economic time for the Commonwealth," she wrote in an e-mail. Continuación...