In Herman Wouk’s novel of the Second World War in the Pacific, The Caine Mutiny, the ship’s master and commander, Lieutenant Commander Queeg, is relived of his command by his subordinates during a typhoon. This mutiny (in the novel, it was called “conduct to the prejudice of good order and discipline”) comes in the wake of a series of questionable, erratic and even illegal actions on Queeg’s part.
Such a mutiny was called for aboard the bad ship UBS Puerto Rico. The “ship’s” executive officer, Miguel Ferrer, is on record has having threatened, berated and coerced his “crew” – the brokers and advisers – into selling closed-end funds heavily loaded with municipal bonds that were high-risk. These bonds ultimately fell to “junk” status. The transactions were even illegal under Puerto Rico law, which (unlike regulations on the mainland), does not differentiate between “brokers” and “financial advisers” (according to 7 L.P.R.A. § 1079).
In fact, those UBS employees had every legal ground for mutiny against Ferrer and the company that aided and abetted him. However, the economy of Puerto Rico is in a sad state, these days. With a poverty rate twice that of Mississippi, high costs of living and an unemployment rate continuing to hover between 14 and 15%, men and women with families to support were understandably reluctant to put their jobs on the line.
Two of them did.
“The ‘Brave Ones’ ”
Their family surname, appropriately enough, means “bold and courageous” in Spanish, with connotations that include “excellence.” Siblings Jorge and Teresa Bravo were indeed bold and courageous throughout their careers as financial advisers – but it was boldness and courage that was always tempered with caution and wisdom when it came to managing their clients’ assets. After serving in the U.S. military, Jorge Bravo went on to work at a number of top investment firms over the next thirty years. He and his sister Teresa worked tirelessly to build their reputation for excellence, consistently putting the interests of their clients first as required by ethics and the law. Their work paid off. Eventually, los hemanos Bravos were offered prominent positions at UBS Puerto Rico. Jorge saw it as an opportunity not only for career advancement; he and Teresa also believed it would put them in positions to better serve their clients.
Over the next few years, the Bravos served as co-senior vice presidents of Wealth Management, eventually managing $120 million in client assets. There is no question that the brother-sister team believed in the company and what they were doing. Teresa herself invested $100,000 of her own money in the same investments she had recommended to her clients – a decision she would come to regret.
The “Commander” Goes Berserk
UBS management as well as employees were well aware that economic conditions in Puerto Rico were like a freight train hurtling south on a northbound track – and the disastrous implications for their clients’ portfolios.
The Chairman of Financial Services, Miguel Ferrer, didn’t give a tinker’s damn. All he knew is that the company was sitting on top of a billion dollars that wasn’t generating one centavo in commissions. Calling his employees into a meeting in February of 2014, he told them in no uncertain terms that they had better get selling
“We all know our gross product is down more than 40%…very bad. Why are we not producing? The brokers…all answer the same…’because we have no product.’ Bull**t! We have a ton of product available!”
Indeed, they did…even if it was plummeting into “junk bond” territory.
“We have to cross the bridge…. between demand and dissatisfaction of our clients… if not, get another job, because [your] job is to find clients the product that is convenient…not to sit [at] your desk waiting for something to happen!”
Ferrer ended his tirade by telling his employees that the previous year’s funds were “exceptional” and that they were to start a media campaign over which he expected the public to correrse (a sexual reference that should be apparent from the context).
The “Brave Ones” Stand Up -At a Cost
While lower-level employees feared for their jobs, the Bravo siblings spoke out against Ferrer and refused to play along. They were summarily dismissed.
Since then, Jorge and Teresa Bravo have found new positions at Aegis Financial, where management is grateful to have advisers with their experience, expertise and integrity. Nonetheless, the stink of corruption at UBS has lingered; fair or not, it has compromised their hard-earned reputations and their ability to generate income for themselves. It is for this reason that the Bravos have filed a FINRA arbitration claim against their former employer for $10 million in compensatory damaged. They will be seeking an undetermined amount in punitive damages as well.
Meanwhile, there is little news about Miguel Ferrer. He has since left UBS (which refuses to comment on the audio recording). Some media sources speculate that he was allowed to resign and granted a generous severance package. If so, it would be par for the course in today’s upside-down, backwards and dysfunctional system that punishes excellence and rewards incompetence and criminal behavior.
And even though $10 million is pocket change to UBS, we can hope that the Bravos are successful in at least stinging the Swiss-based financial juggernaut in their impending arbitration.
It’s unlikely to teach UBS a thing, but at least it will make up for the trouble the company caused for a pair of dedicated, ethical financial service professionals who are examples of a rapidly-dying breed.