Two Investors File Securities Arbitration Claim Against Santander Securities Over Puerto Rico Municipal Bonds
Two investors, seeking to recover the investment losses they sustained in Puerto Rico municipal bonds, are pursuing a FINRA arbitration claim against Santander Securities LLC. According to the case, the Puerto Rican investors are claiming breach of fiduciary duty, violation of common law fraud, negligent supervision, and the unsuitable investment of their money in the Puerto Rico Public Finance Corporation RFDG Commonwealth Appropriation Series A Bond. Santander Securities is a Banco Santander (SAN) subsidiary.
These investors are among the thousands seeking to recover the money they lost in Puerto Rico bonds and Puerto Rico closed-end bonds after brokerage firms, such as Santander Securities, Banco Popular, and UBS Puerto Rico (UBS-PR) recommended that they invest in these securities. Many investors were never equipped to handle the risks involved in Puerto Rico bonds yet their broker encouraged them to invest, ignoring suitability rules and often misrepresenting the investment.
Last October, Santander agreed to pay $6.4 million to settle allegations related to Puerto Rico bonds, including $4.3 million in restitution to clients in the U.S. territory, as well as a $2 million fine. FINRA, which announced the settlement, said the brokerage unit would repurchase the Puerto Rico bonds from a group of customers that were still holding them. The self-regulatory organization had pursued an enforcement action against Santander Securities because of the way the firm’s brokers sold and bought the bonds during a more than three-year period beginning in 2010.
For many investors, Puerto Rico bonds seemed like a good investment because of the tax benefits they offered, along with a yield that was higher than comparable bonds that were issued by U.S. cities and states. Unfortunately, when the price of the Puerto Rico municipal bonds dropped in 2013, many investors sustained huge losses.