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UNITED STATES OF AMERICA 

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934 

Release No. 76013 / September 29, 2015

ADMINISTRATIVE PROCEEDING 

File No. 3-16846

In the Matter of

UBS FINANCIAL SERVICES 

INCORPORATED OF PUERTO RICO

Respondent.

ORDER INSTITUTING

ADMINISTRATIVE PROCEEDINGS 

PURSUANT TO SECTION 15(b) OF THE

SECURITIES EXCHANGE ACT OF

1934, MAKING FINDINGS, AND

IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative proceedings be, and hereby are, instituted pursuant 

to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), against UBS 

Financial Services Incorporated of Puerto Rico (“UBSPR” or “Respondent”).

II.

In anticipation of the institution of these proceedings, UBSPR has submitted an Offer of 

Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, UBSPR consents to the entry of this Order Instituting Administrative Proceedings 

Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and 

Imposing Remedial Sanctions (“Order”), as set forth below.

III.

On the basis of this Order and UBSPR’s Offer, the Commission finds1that:

 

1 The findings herein are made pursuant to UBSPR’s Offer and are not binding on any other person or entity 

in this or any other proceeding.
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SUMMARY

1. UBSPR failed reasonably to supervise Jose G. Ramirez Jr. (“Ramirez”) with a 

view to preventing and detecting his violations of the federal securities laws from at least 2011 

through 2013. Ramirez, a UBSPR registered representative, made material misrepresentations 

and engaged in a fraudulent scheme involving the use of proceeds of non-purpose lines of credit 

(“LOC”) to purchase securities. UBSPR offered its customers LOCs from a Utah-based affiliate, 

UBS Bank USA (“BUSA”). UBSPR’s internal policy and the customer’s loan agreements with 

BUSA prohibited the use of LOC proceeds to purchase, carry, or trade in securities; rather, LOCs 

were to be used to provide existing customers with liquidity and immediate access to cash to 

cover other purchases or expenses.

2. However, Ramirez effected a scheme that resulted in an increase to his 

compensation by soliciting certain customers to use proceeds from LOCs to purchase additional 

shares in UBSPR closed-end funds (“CEFs”). So that holders can qualify for certain tax 

benefits, the CEFs predominantly hold Puerto Rico municipal bonds and are only available to 

Puerto Rico residents. Ramirez misrepresented to certain customers UBSPR’s policy prohibiting 

the use of LOC proceeds to purchase securities by advising them to transfer money from their 

UBSPR LOC account to an outside bank account, wait a few days, and then deposit money from 

the outside bank account into the customer’s UBSPR brokerage account and purchase CEFs. 

Ramirez also made material misrepresentations to these customers regarding the safety of this 

strategy and did not disclose the risks of maintenance calls BUSA could make in the event the 

value of the customer’s account (including its CEF holdings) decreased below specified levels of 

collateralization. Ramirez offered and sold approximately $50 million in CEFs to certain 

customers and made over $1 million in additional compensation. 

3. UBSPR did not establish or implement reasonable procedures and had inadequate 

systems in place designed to prevent and detect Ramirez’s conduct and his misstatements and 

omissions advocating the use of LOC proceeds to purchase securities in contravention of 

UBSPR’s policy and the customers’ agreements with BUSA. Moreover, UBSPR was made 

aware on at least two occasions that Ramirez may have been violating that policy, yet UBSPR

procedures failed to address reasonable follow-up for violations of this policy.

RESPONDENT

4. UBSPR, a Puerto Rico corporation with its principal place of business in Hato 

Rey, Puerto Rico, is a broker-dealer registered with the Commission since 1982. UBSPR is a 

subsidiary of UBS Financial Services Inc. (“UBSFSI”), a broker-dealer registered with the 

Commission.

OTHER INDIVIDUALS AND ENTITIES

5. Jose G. Ramirez Jr., 56, was a registered representative and associated person of 

UBSPR in UBSPR’s Guaynabo branch and was also a sales manager in that branch for a brief 

period of time. Ramirez was terminated by UBSPR in January 2014. Ramirez has been 

permanently barred from association with any FINRA member in any capacity.
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6. Ramiro L. Colon, III, 49, was a registered representative and associated person of 

UBSPR, and was the branch office manager (“BOM”) in UBSPR’s Guaynabo office from 2007 

through 2014 where he served as Ramirez’s supervisor. From early 2011 through 2014 Colon 

was also the BOM of the Ponce and Mayaguez branches in addition to the Guaynabo branch 

(collectively, the Guaynabo Complex). Since January 2015, Colon is employed as a registered 

representative and associated person of UBSFSI, and is a financial advisor at UBSFSI and no 

longer serves in a supervisory capacity. 

7. BUSA is a Salt Lake City, Utah-based FDIC-insured industrial bank organized 

and licensed since 2003. BUSA is regulated by the Utah Department of Financial Institutions, 

the FDIC and the Consumer Financial Protection Bureau.

8. The CEFs are closed-end investment management companies incorporated and 

organized under the laws of the Commonwealth of Puerto Rico. Since 1995, UBSPR has offered 

its customers twenty-three CEFS, nine of which are co-managed CEFs and fourteen of which are 

sole managed CEFs. UBSPR has served as primary underwriter for the twenty-three CEFs. The 

CEFs are not eligible margin securities or traded on any exchange or quoted on any quotation 

service, with UBSPR serving as the main secondary market dealer or liquidity provider. The 

CEFs are not registered with the Commission.

UBSPR’s LINE OF CREDIT PROGRAM

9. In approximately 2003, BUSA began offering UBSPR brokerage customers a 

non-purpose line of credit through UBSPR at no initial cost to the customer and at interest rates 

below interest rates charged for margin loans. UBSPR encouraged registered representatives to 

open LOCs for new customers. Registered representatives were incentivized to offer LOCs, in 

part, because they received compensation based on an additional production credit and, in 2013,

credit for net new assets when an LOC was drawn upon.

RAMIREZ’S VIOLATIVE CONDUCT

10. From 2011 through 2013, Ramirez offered and sold millions of dollars of CEFs to

certain customers while soliciting them to use LOCs to purchase such securities and fraudulently

misrepresenting the risks of this strategy to them. Ramirez knew that UBSPR policy and the 

customers’ agreements with BUSA did not allow customers to use proceeds from the LOCs for 

the purpose of purchasing securities. Moreover, Ramirez signed LOC application forms 

misrepresenting that he had explained to those customers that: (1) BUSA can demand repayment

of the loan at any time and (2) if the value of the pledged collateral falls below BUSA’s 

maintenance requirements BUSA may require the customer to deposit additional collateral 

and/or sell the pledged collateral to repay the loan.

11. Despite the prohibitions on doing so, Ramirez presented to certain customers a 

way to make additional money by using the LOCs to increase their holdings of the CEFs. 

Because customers could borrow money through LOCs at rates as low as 1.5 percent and the 

CEFs were generating tax advantaged returns of greater than 6 percent, there was an arbitrage 

opportunity for customers and Ramirez also saw an opportunity to increase his production and 

commissions if customers purchased additional CEF shares with the proceeds of LOCs. To 
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accomplish his scheme, Ramirez encouraged these customers to withdraw funds from their LOC 

accounts, deposit those funds into an account at another bank, wait several days, and then redeposit the funds from the outside bank account into a UBSPR brokerage account and purchase 

CEFs.

12. Ramirez misrepresented the strategy to numerous customers. When asked about 

the purpose of the deposit and redeposit, Ramirez explained to certain customers that one could 

not transfer money from an LOC internally to another UBSPR account. However, Ramirez 

stated that there was no violation as long as the proceeds were first transferred to an outside bank 

account. In meetings with these customers, to reassure them of the propriety of his strategy, 

Ramirez would take a dollar bill out of his wallet and say “if I give you this dollar and you bring 

[a different dollar] back next month, it’s not the same dollar.” Many of Ramirez’s customers had 

been with Ramirez for many years and made money by going along with Ramirez’s 

recommendations and strategies and knew of his standing within UBSPR as a top broker. 

Therefore, they either wrote a check or requested a wire transfer from their LOC account for 

deposit into their personal bank accounts at outside banking institutions. Customers then 

redeposited money into their UBSPR brokerage accounts and Ramirez purchased CEF shares on 

behalf of his customers contrary to UBSPR policy and their agreement with BUSA. 

13. By advising certain customers to use LOC proceeds to purchase CEF shares, 

Ramirez exposed customers – some of whom were listed in their account documents as being 

“conservative” with regard to risk tolerance – to a greater risk than they otherwise would have 

been exposed. From January 2011 through September 2013, Ramirez executed more than 200 

trades on behalf of customers in connection with this scheme. By September 2013, these 

Ramirez customers had received tens of millions of dollars in maintenance calls from BUSA 

after the value of their CEF shares declined.

UBSPR’S FAILURE REASONABLY TO SUPERVISE

14. UBSPR’s “Credit Line Products WM Americas Compliance Policy” required that 

a credit line obtained from the firm must be used for purposes other than to purchase, trade, or 

carry securities. The customers’ agreements with BUSA contained similar prohibitions, which 

also appeared on the face of the loan checks that customers received. The policy also required 

that, as part of the application process, registered representatives take reasonable steps to ensure 

customers understood the risks associated with taking a LOC, including that their collateral may 

become insufficient due to market declines and, in such circumstances, the customer may be 

required to increase the collateral, repay funds borrowed and/or sell securities voluntarily or 

involuntarily via a maintenance call.

15. However, UBSPR’s policy did not provide for how the policy should be 

implemented nor did it describe steps registered representatives should take to ensure customers 

understood the risks involved. Although BUSA monitored transfer activity between UBSPR 

brokerage accounts for potential misuse of LOCs, UBSPR’s policy did not implement any 

procedures concerning monitoring the proscribed and prohibited conduct when proceeds were 

transferred outside of UBSPR accounts.
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16. UBSPR had inadequate procedures or systems in place to address compliance 

with its policy after the application process was completed and once the LOC was approved by 

BUSA. Indeed, UBSPR’s Branch Office Managers’ Supervisory Manual only addressed the 

application process and did not speak to the usage of LOCs once approved. Further, supervisors 

and operations personnel in the Guaynabo branch, where Colon served as supervisor and 

Ramirez worked, received no reports concerning credit line usage (other than compensation and 

production), and therefore did not conduct reviews for whether customers were using LOC 

proceeds to purchase securities, even though they were responsible for making sure registered 

representatives followed firm policy.

17. In August 2011, an operations manager in the Guaynabo branch questioned a 

series of transactions in the accounts of a Ramirez customer which she believed could have been 

the result of improper use of LOC proceeds to purchase securities. The operations manager 

raised her concerns to her supervisor, the Complex Administrative Manager (“CAM”), who took 

the information to Colon, who then met with Ramirez and discussed the transaction. Although 

Ramirez strenuously denied any impropriety, Colon reviewed the customer profile and discussed 

the activity with the CAM but conducted no additional investigation or monitoring and never 

discussed with the customer his usage of LOC proceeds or these specific transactions. Weeks 

later, the operations manager noticed a similar series of transactions by the same Ramirez client. 

Again, the operations manager raised the issue with the CAM. Upon hearing the concerns, and 

instead of escalating the issue, the CAM did not raise the issue with Colon or anyone else.

18. In addition, UBSPR failed to establish reasonable policies and procedures for 

follow-up of indications of misuse of LOCs. In the fall of 2011, the branch office manager in 

UBSPR’s Hato Rey office – UBSPR’s main branch – raised concerns to UBSPR’s compliance 

group and asked it to investigate whether UBSPR registered representatives were improperly 

encouraging customers to use LOC proceeds to purchase securities. The compliance group 

contacted a compliance officer for BUSA who stated BUSA ran a report with the ability to track 

whether or not purchases had been made in accounts being used as collateral for LOCs within a 

certain time from a withdrawal and transfer from the LOC. It was not understood, however, that 

this report would not have captured the activity at issue because the money was first sent outside 

the firm before being redeposited and used to purchase securities. Until these events became 

known, UBSPR did not have a system in place to track LOC money moved outside the firm and 

then returned to the firm.

19. The Hato Rey manager followed up with the compliance group at various times in 

2012 and was ultimately informed that compliance found no improper conduct. However, 

although certain reports were run, they were not adequately reviewed and, in any event, the 

Guaynabo branch was not included in the reports because of a clerical mistake that was not 

noticed. The compliance group’s failure to adequately review this LOC information, including

activity in the Guaynabo branch, was a significant lapse. Despite having twenty percent fewer 

registered representatives than UBSPR’s headquarters in Hato Rey, Guaynabo branch customers 

had $475 million in total LOCs as of July 2013, nearly double Hato Rey’s portfolio. Also, 

Ramirez was UBSPR’s leading credit line producer among registered representatives in Puerto 

Rico during this period.
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20. In 2013, the Puerto Rico bond market collapsed. The significant erosion in Puerto 

Rico bond prices beginning in August 2013 hit Puerto Rico investors hard, and particularly CEF 

holders, because the CEFs employed leverage up to 50 percent of the total CEF assets.

21. Many of Ramirez’s customers with LOCs collateralized by brokerage accounts 

holding CEFs began receiving maintenance calls starting in August of 2013 and met with 

UBSPR representatives to discuss outstanding maintenance calls. During these meetings certain 

customers informed UBSPR representatives, including Colon, that Ramirez solicited them to use 

proceeds from LOCs to reinvest in additional CEF shares. Ramirez did not inform many of these 

customers of the risk associated with doing so.

22. As a result of these meetings with customers and related complaints, UBSPR 

conducted an internal investigation into the conduct alleged in the complaints. This review 

uncovered further incidences of using LOC proceeds to purchase CEF shares by certain 

customers of Ramirez. As a result, UBSPR terminated Ramirez and issued to Colon a letter of 

education for inaction related to this improper use of LOCs.

VIOLATIONS AND FAILURE REASONABLY TO SUPERVISE

23. Under Section 15(b)(4)(E) of the Exchange Act, broker-dealers are responsible 

for reasonably supervising, with a view to preventing and detecting violations of the federal 

securities laws, persons subject to their supervision. Respondent was responsible for supervising 

Ramirez.

24. Ramirez engaged in conduct that violated Section 17(a) of the Securities Act of 

1933, which prohibits fraudulent conduct in the offer and sale of securities, and Section 10(b) of 

the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in connection 

with the purchase or sale of securities. Respondent failed reasonably to supervise Ramirez for 

the purposes of Section 15(b)(4)(E) of the Exchange Act because Respondent failed to establish 

procedures reasonably designed to prevent and detect Ramirez’s violations of the securities laws 

and failed to have a system to implement any such procedures in a manner that would reasonably 

be expected to prevent and detect the violations by Ramirez.

AGREEMENT TO COOPERATE

25. In connection with this action and any related judicial or administrative 

proceeding or investigation commenced by the Commission or to which the Commission is a 

party, Respondent (i) agrees to use all best efforts to make its principals, partners, officers, and 

employees available to appear and be interviewed by Commission staff at such times and places 

as the staff requests upon reasonable notice; (ii) will accept service by mail or facsimile 

transmission of notices or subpoenas issued by the Commission for documents or testimony at 

depositions, hearings, or trials, or in connection with any related investigation by Commission 

staff; (iii) appoints Respondent’s counsel as agent to receive service of such notices and 

subpoenas; (iv) with respect to such notices and subpoenas, waives the territorial limits on 

service contained in Rule 45 of the Federal Rules of Civil Procedure and any applicable local

rules, provided that the party requesting the testimony reimburses Respondent’s travel, lodging, 

and subsistence expenses at the then-prevailing U.S. Government per diem rates; and (v) 
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consents to personal jurisdiction over Respondent in any United States District Court for 

purposes of enforcing any such subpoena.

In determining whether to accept the Offer, the Commission has considered this 

agreement to cooperate.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in UBSPR’s Offer.

Accordingly, pursuant to Section 15(b) of the Exchange Act, it is hereby ORDERED 

that:

A. UBSPR is censured.

B. UBSPR shall, within 14 days of the entry of this Order, pay disgorgement of 

$1,188,149.41, plus prejudgment interest of $174,196.97, to the Securities and Exchange 

Commission. If timely payment is not made, additional interest shall accrue pursuant to SEC 

Rule of Practice 600. UBSPR shall, within 14 days of the entry of this Order, pay a civil money 

penalty in the amount of $13,637,653.62 to the Securities and Exchange Commission. If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.

Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

UBSPR as a Respondent in these proceedings, and the file number of these proceedings; a copy 

of the cover letter and check or money order must be sent to Glenn S. Gordon, Division of 

Enforcement, Securities and Exchange Commission, Miami Regional Office, 801 Brickell 

Avenue, Suite 1800, Miami, Florida 33131.
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C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the disgorgement, prejudgment interest and penalties referenced in Section 

IV, Paragraph B above. Amounts ordered to be paid as civil money penalties pursuant to this 

Order shall be treated as penalties paid to the government for all purposes, including all tax 

purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees that in any 

Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or 

reduction of any award of compensatory damages by the amount of any part of Respondent’s 

payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor 

Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of 

a final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay 

the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment 

shall not be deemed an additional civil penalty and shall not be deemed to change the amount of 

the civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor 

Action” means a private damages action brought against Respondent by or on behalf of one or 

more investors based on substantially the same facts as alleged in the Order instituted by the

Commission in this proceeding.

By the Commission.

Brent J. Fields 

Secretary