UBS AG is investigating the behavior of its financial advisors in Puerto Rico.

The firm is trying to find if its advisors improperly offered non-purpose loans to clients for purchase of its securities, according to UBS spokeswoman Karina Byrne.

The investigation comes after a Puerto Rico law firm threatened to file cases on behalf of clients who live in the commonwealth and invested in closed end municipal bond funds created by UBS. The Vicente & Cuebas law firm said it plans to either file multiple arbitration cases with the Financial Industry Regulatory Authority or a single suit in federal court.

The UBS clients were not advised of the risks if the munis’ market prices went down, Vicente & Cuebas partner Harold Vicente Sr. said. Some of the law firm’s clients claim they were encouraged to take out loans to purchase fund shares, Vicente said.

“Margin loans can be used to buy securities but non-purpose loans … are used for things like real estate or business expenses, but not for securities purchases,” Byrne said.

“It is a longstanding UBS requirement that our clients must sign documents attesting that they will not use non-purpose loans for securities purchases, before those monies are released,” she said.

“Most banks who offer these kinds of loans say that non-purpose loans are not for securities,” Byrne said.

UBS has put one of its financial advisors on administrative leave, pending further review, Byrne said.

Meanwhile, the Law Offices of Christopher Gray, P.C., based in New York City, has filed a FINRA arbitration claim on behalf of a client of a UBS closed end fund of Puerto Rico munis. The fund was marketed as safe, the office stated.

Partly because of the fund’s own use of leverage, the share price of the fund cited in the FINRA arbitration case went from $8.55 in July to $3.74 a share as of Oct.1, Gray’s office stated.

“General weakness in municipal markets across the U.S. and Puerto Rico and apprehension about the direction of interest rates have led to steep declines in Puerto Rico municipal bond and closed end fund prices and a lack of liquidity for these securities,” Byrne said. “UBS has been monitoring this situation and continuously provided our clients with research and insights on interest rate risks and municipal bond price fluctuations.”