Puerto Rico Bonds

Records from the Financial Industry Regulatory Authority (FINRA) show that since 2014, it has received an influx of arbitration case filings relating to Puerto Rico bonds from claimants, almost all of whom reside in Puerto Rico. As of January 31, 2017, nearly 1900 cases involving Puerto Rican bonds have been filed; of these, more than 1100 cases are pending and over 30 have been decided by award.

Many individuals who invested on bonds issued by the Puerto Rican government are now suffering losses due to the financial dilemma that this government has sunk into in recent years. Though investors benefited from the handsome returns or high yields these bonds offered during a period of historically low interest rates, these same investors are now feeling the bite of losses in their portfolios.

During the past several years, the Puerto Rican government has struggled with compounding debts and economic decline, which have caused the value of Puerto Rico’s municipal tax-free bonds falling considerably. It was in September 2013 when Puerto Rico bond values began to decline sharply that investors who held these bonds also began to suffer massive losses.

Investors seeking remedy for their losses in Puerto Rico bonds are advised to file their disputes in Financial Industry Regulatory Authority, Inc. (FINRA) arbitration. This is the case, especially with those who have invested in a closed-end fund that held Puerto Rican debt or a high-risk/high-yield Puerto Rican bond without understanding the risks associated with the investment, if they hope to recover their losses.

According to a Puerto Rico Bond fraud attorney, investors in the United States and Puerto Rico are filing FINRA arbitration claims against their brokerage firms which advised them to make investments in Puerto Rico bonds or bond funds. Many of these investors were not adequately warned about the high risk nature of the bonds, thus, suffering serious losses as a result. Investors may have a claim against the brokerage firm based on misrepresentation, unsuitability, breach of fiduciary duty and state and federal securities laws.

A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a financial advisor recommends a security to his customers, the financial advisor must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for the customer. The suitability of an investment for a particular individual is at the center of the investment process and one of the key duties owed by a broker to the customer. Thus, a firm may be held liable for its broker’s failure to recommend suitable investments to its customers.

 

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