Nov 3 (Reuters) - An investor who alleges he lost more than $400,000 in Puerto Rico closed-end bond funds sold by a UBS AG unit has sued Puerto Rico’s financial regulator, challenging the transparency of its $5.2 million settlement with the firm.
Manuel Martínez-Umpierre, a client of UBS Financial Services Inc of Puerto Rico, asked a local court on Friday to order the release of confidential documents that Puerto Rico’s Office of the Commission of Financial Institutions used as the basis of its settlement with the UBS unit on Oct. 9.
The settlement required UBS to pay $1.7 million in restitution to 34 Puerto Rico residents with low net worth who had invested in the funds and an additional $3.5 million to an investor education fund.
Martínez-Umpierre was not eligible for compensation under that settlement, but is a plaintiff in a separate shareholder suit against UBS involving the funds.
The documents he is seeking could potentially help in that case and in more than 500 arbitration complaints about the closed-end bond funds. Thousands of investors in the funds lost money following a sharp decline in the value of Puerto Rico municipal bonds last year.
Martínez-Umpierre wants to know whether his broker was one of six at UBS who are subject to extra supervision under the settlement, but whose identities remain confidential.
He also wants to shed light on how the low net-worth investors were selected, as well as their specific losses, according to the petition filed at the San Juan Superior Court, the city’s highest trial court.
Puerto Rico’s Commissioner of Financial Institutions, Rafael Blanco-Latorre said in an interview that releasing the documents would reveal personal and financial details about UBS clients, among other issues.
What is more, his office is not taking action against the six brokers mentioned in the settlement, so they are “entitled to confidentiality,” he added.
The suit names both Blanco-Latorre and his office. It does not name UBS, which declined to comment.
Martínez-Umpierre’s lawyer believes the public has a legal right to the information.
“There is no compelling reason of confidentiality here,” said the lawyer, Harold Vicente-Gonzalez of San Juan.
The settlement did not include other investors who have already filed a total of more than $900 million in claims in the Financial Industry Regulatory Authority’s securities arbitration system to recoup money they say they are owed.
Nonetheless, it did compel UBS to further review its accounts to see if other low net-worth investors had significant liquid assets in the closed-end funds, and whether restitution is necessary, according to the settlement.
Blanco-Latorre said his staff is very small and his examiners interviewed a sampling of bond fund investors, based on factors such as their ages and whether more than 40 percent of their assets had been in the funds.
Reporting by Suzanne Barlyn; Additional reporting by Jolene Santiago. Editing by Andre Grenon