Morgan Stanley Pays Widow Over $95K for Puerto Rico Securities Losses

A Financial Industry Regulatory Authority (FINRA) arbitration Panel has ordered brokerage firm Morgan Stanley to pay Morrisa Schiffman (Schiffman) $95,632 for the losses she sustained from investing in Puerto Rico securities. Schiffman, who is a widow from New Jersey, had been using the income from the Puerto Rico investments to supplement her retirement. She accused the firm of making unsuitable recommendations and engaging in negligent supervision and disclose failures.

Bloomberg reports this is one of the first cases involving an investor in the U.S mainland seeking financial recovery related to the Commonwealth’s debt. More than 1,300 FINRA arbitration cases have already been filed in Puerto Rico for residents of the island who sustained heavy losses when Puerto Rico bonds began their fall in 2013.

Puerto Rico bonds were a big draw for investors in and out of Puerto Rico for a number of years because the securities are tax-exempt in the U.S. However, since these bonds dramatically declined in value nearly three years ago, investors have come forward to file arbitration claims against brokerage firms who recommended the bonds to them.

Our securities firm’s analysis has shown that, despite their tax advantages, most Puerto Rico bonds were not suitable for many customers’ investment goals or their portfolios. Brokers should have steered customers away from the Puerto Rico securities instead of toward them. Because of their negligence, there are investors who have lost all of their money in these bonds.

Firms named in recent Puerto Rico muni bond fraud cases include UBS Financial Services Incorporated of Puerto Rico (UBS), Banco Santander, Banco Popular, Stifel Nicolaus & Co. (SF), Bank of America’s (BA) Merrill Lynch, and others.

Puerto Rico owes $70 billion in debt. The Commonwealth recently defaulted on $37 million of payments that were due to certain creditors so that it could pay more of the general obligation debt that the island owes.

Insurers Ambac Assurance Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), and Assured Guaranty Corp. (Assured) are now suing the territory over the default, for which they’ve had to pay millions of dollars on claims.

This week, the territory’s officials met with financial advisers and attorneys who represent a number of investor groups to present the island’s debt-reduction plan. According to Bloomberg, the proposal seeks to have bondholders agree to accept lower values for investments.

Currently, Puerto Rico’s bonds come with different repayment pledges and the Commonwealth is proposing that each credit be treated separately. Also under the proposal, investors would trade securities for two different kinds of bonds that would delay payments.

Under one kind of bond, a fixed rate would be offered in 2018 and that would go up to a 5% interest rate in 2021. The second kind of bond would suspend interest for a decade. The interest would be calculated based on Puerto Rico’s finances. The territory’s governor, Alejandro Garcia Padilla, said that his government is committed to working with creditors to resolve the island’s fiscal and economic crisis.

Our Puerto Rico bond fraud lawyers have been hard at work helping investors in the US and on the island to recoup their financial losses from investing in these securities. At Shepherd Smith Edwards and Kantas, LTD LLP, we understand your needs and hablamos Español. Call or email us to request your free case evaluation and no obligation consultation.

Morgan Stanley Paid New Jersey Widow Over Puerto Rico Losses, Bloomberg, January 28, 2016



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