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Puerto Rico Bond Fraud

Puerto Rico Bond Fraud Attorneys

For years, brokerage firms like UBS Puerto Rico, Santander Securities, Popular Securities, Merrill Lynch and Oriental Financial encouraged investors to put their money into Puerto Rico municipal bonds and heavily concentrated Puerto Rico bond funds. However, due to Puerto Rico’s ever-worsening financial crisis and the risky, unsuitable investment strategy they were pushed into taking, those innocent investors now face devastating financial losses.

Today, Investment Loss Recovery Group (along with Rodriguez Fernandez Law Offices, LLC) is helping those investors to seek the justice and compensation they deserve through the Financial Industry Regulation Authority (FINRA) arbitration process and other means.

Our founding attorneys, Jason Haselkorn and Matthew Thibaut, have a unique legal and financial services industry background. It makes a difference for our clients. They are former licensed securities brokers and brokerage firm defense lawyers with more than 40 years of combined legal experience, including an extensive background in investment fraud litigation and securities arbitration. They know how to hold financial institutions accountable, and they can help investors to seek maximum recovery of their losses as quickly as possible.

Investors in Puerto Rico and in the mainland United States are now filing private, confidential FINRA arbitration claims to recover brokerage firm investment losses relating to Puerto Rico bonds and Puerto Rico bond funds. FINRA estimates that another 5,000 cases could be filed in the near future. If you have lost money in these investments, don’t let yourself be a victim, and don’t become “just another number” in a long line of cases. Get the highly experienced, personalized service that you deserve.

Contact us today for a free consultation about your case.

What Is the Problem with Puerto Rico Bonds and Puerto Rico Bond Funds?

Investors have traditionally viewed municipal, tax-free bonds as being a stable, attractive investment. Investors receive interest that is paid out over time, and when the bonds mature, they realize the return of their initial investment. However, the bonds issued to finance the operations of the Commonwealth of Puerto Rico have proven to be a nightmare for investors in Puerto Rico and throughout the continental United States.

As Bloomberg reports, Puerto Rico has the population of Connecticut and an economy smaller than Nebraska’s but its debt of $74 billion is comparable to those of California, New York and Massachusetts. The territory’s debt crisis has led Puerto Rico to miss millions of dollars in bond payments. The situation has only grown worse since Hurricane Maria. As a result, the value of Puerto Rico’s government bonds has plummeted ? and left investors with steep financial losses. In fact, many have seen their retirement funds and lifetime savings wiped out.

The problem is that brokers and brokerage firms pushed investors to directly invest in these bonds or to put their money into mutual bonds that were poorly diversified and overly concentrated in Puerto Rico municipal bonds, including “closed-end” funds that offered a restricted number of shares and carried an enormous amount of risk. Additionally, these financial institutions encouraged many investors to use “leverage,” or borrow money, in order to invest in more securities.

It is now clear that UBS Puerto Rico and many other brokerage firms failed to implement a reasonably designed system of supervision to identify and prevent unsuitable transactions and investment strategies related to Puerto Rico Investors.

The good news is that the investors are now fighting back. Through September 2018, investors had filed 2,983 Puerto Rico FINRA arbitration cases. Roughly 99 percent of those cases have resulted in a positive award or monetary settlement, or a total of $470 million in settlements and awards. If you have suffered losses, know your rights before your potential claim expires.

UBS Puerto Rico Bond Fund Loss

As CNBC reports, UBS Puerto Rico (a subsidiary of UBS Americas Financial Services) was, at one time, “the largest wealth management business in Puerto Rico,” representing roughly 20,000 households and managing about $10 billion worth of investments in Puerto Rico bonds and bond funds, including closed-end funds and proprietary closed-end funds that could only be sold to island residents or island-based corporations.

Woman being skeptical on the agents offer.Those funds had an “immense overconcentration” of Puerto Rico-issued securities, according to CNBC. When those bonds underwent a massive sell-off in 2013, “the heavy concentration and high leverage of the funds ultimately led to staggering losses for investors,” according to the news outlet.

It is no wonder that 2,087 Puerto Rico bond arbitration cases, or 70 percent of those reported through September 2018, have been filed against UBS Puerto Rico, including cases which allege breach of fiduciary duty, negligence and fraud.

Through September 2018, UBS Puerto Rico had paid out $329.5 million to settle 1,262 of those filings. These cases are private, confidential and typically resolved voluntarily. However, how you present your claims and your losses in the process can make a big difference for you in the amount of your settlement.

Puerto Rico bond funds managed or co-managed by UBS Puerto Rico include:

  • Puerto Rico Fixed Income Fund, Inc.
  • Puerto Rico Fixed Income Fund II, Inc.
  • Puerto Rico Fixed Income Fund III, Inc.
  • Puerto Rico Fixed Income Fund IV, Inc.
  • Puerto Rico Fixed Income Fund V, Inc.
  • Puerto Rico Fixed Income Fund VI, Inc.
  • Tax Free Puerto Rico Fund, Inc.
  • Tax Free Puerto Rico Fund II, Inc.
  • Puerto Rico Investors Tax-Free Fund, Inc.
  • Puerto Rico Investors Tax-Free Fund II, Inc.
  • Puerto Rico Investors Tax-Free Fund III, Inc.
  • Puerto Rico Investors Tax-Free Fund IV, Inc.
  • Puerto Rico Investors Tax-Free Fund V, Inc.
  • Puerto Rico Investors Tax-Free Fund VI, Inc.
  • Puerto Rico Investors Bond Fund I, Inc.

Santander Securities of Puerto Rico Bond Fraud

Santander Securities, LLC, the investment division of Banco Santander, is another brokerage firm which has been the subject of numerous FINRA arbitration filings. It is believed that Santander Securities encouraged its advisors to recommend that investors invest in Puerto Rico bonds and bond funds with lines of credit that may have included additional commissions, fees and other incentives for the firm and its advisors. The Santander Securities closed-end funds were highly leveraged in some cases, by more than 50 percent (compared to U.S. municipal bonds where leverage is around 22 percent on average). In 2015, Santander Securities resolved a FINRA regulatory matter for $6.4 million.

Puerto Rico bond funds managed or co-managed by Santander Securities include:

  • First Puerto Rico AAA Fixed Income Fund
  • First Puerto Rico AAA Target Maturity Fund I
  • First Puerto Rico AAA Target Maturity Fund II
  • First Puerto Rico Target Maturity Income Opportunities Fund
  • First Puerto Rico Target Maturity Income Opportunities Fund I
  • First Puerto Rico Target Maturity Income Opportunities Fund II
  • First Puerto Rico Tax-Advantaged Target Maturity Fund I
  • First Puerto Rico Tax-Advantaged Target Maturity Fund II
  • First Puerto Rico Tax-Exempt Target Maturity Fund II
  • First Puerto Rico Tax-Exempt Target Maturity Fund III
  • First Puerto Rico Tax-Exempt Target Maturity Fund IV
  • First Puerto Rico Tax-Exempt Target Maturity Fund V
  • First Puerto Rico Tax-Exempt Target Maturity Fund VII
  • First Puerto Rico Tax-Exempt Fund
  • First Puerto Rico Tax-Exempt Fund II
  • First Puerto Rico Daily Liquidity Fund.

Merrill Lynch & Other Firms Bond Fraud

In addition to UBS Puerto Rico and Santander Securities, investors are taking action against many other brokerage firms, including:

  • Oriental Financial Services Corp.
  • Merrill Lynch
  • Popular Securities
  • Herbert J. Sims & Co., Inc.
  • FMS Bonds, Inc.
  • RBC Capital Markets, LLC
  • Oppenheimer & Co., Inc.
  • Morgan Stanley
  • Janney Montgomery Scott, LLC
  • Hennion & Walsh, Inc.

Oriental Financial, for instance, recently was sanctioned in a FINRA arbitration proceeding and required to submit a proposed method for identifying, reviewing and remediating unsuitable portfolios based on the concentration of Puerto Rico securities.

Additionally, FINRA fined Merrill Lynch $6.25 million and was ordered to pay $780,000 in restitution for its inadequate supervision of customers’ use of leverage in brokerage accounts. Merrill Lynch was alleged to lack adequate supervisory systems to ensure the suitability of transactions in certain Puerto Rico securities, including municipal bonds and closed-end funds.

The following is a list of bonds that are also the subject of various claims:

  • Puerto Rico Sales Tax Financing Corporation (COFINA)
  • Puerto Rico Public Finance Corporation (PFC)
  • Puerto Rico Aqueduct and Sewer Authority (PRASA)
  • Government Development Bank of Puerto Rico (GDB)
  • Puerto Rico Employee Retirement System (ERS)
  • Puerto Rico Electric Power Authority (PREPA)
  • Puerto Rico Highway & Transportation Authority (PRHTA)
  • Puerto Rico Housing Finance Authority (PRHFA)
  • Puerto Rico Industrial Development Company (PRIDCO)
  • Puerto Rico Infrastructure Financing Authority (PRIFA)
  • Puerto Rico Public Buildings Authority (PBA)

Deadlines Are Coming Up Fast

If you are an investor in Puerto Rico or the mainland United States who has lost significant funds due to your investment in Puerto Rico bonds or bond funds, you need to act fast to preserve your claim. For instance, FINRA rules requires claims to be filed within six years from the date of the transaction or occurrence which gives rise to a claim.

To discuss your legal rights and options, contact the Investment Fraud Lawyers for a free consultation. Our highly respected securities lawyers have represented clients from Hawaii to Puerto Rico and across the continental U.S. Our law firm maintains a nationwide practice and is prepared to assist you in pursuing the maximum financial recovery possible.

With our significant support staff, previous work experience in the securities industry, and our depth and breadth of resources, we are ready to go to work for you today. Call or reach us online day or evening to learn more.