Even after more than three years since the Puerto Rico bonds and closed-end bond funds originally dropped in their initial value, many investors are still waiting to recoup losses they sustained from investing in these securities. Meantime, the U.S. territory continues to deal with its financial woes as it struggles to pay back its $70 billion of debt. At Shepherd Smith Edwards and Kantas, our Puerto Rico municipal bond fraud attorneys have worked hard this year in helping our clients, who are among the thousands of investors from the Commonwealth that suffered significant losses when the island’s securities plunged in value in 2013, in trying to recoup their money.
Below is a recap of some of the significant claims recovered for Puerto Rico investors this year that made the headlines:
A Financial Industry Regulatory Authority (FINRA) Arbitration panel ordered Morgan Stanley (MS) to pay a New Jersey widow over $95,000. Morrisa Schiffman accused the broker-dealer of making unsuitable recommendations to her, as well as of inadequate supervision and disclosure failures. Her FINRA Panel ultimately agreed.
Merrill Lynch was ordered to pay $780,000 in restitution to customers who invested in Puerto Rico closed-end bond funds and municipal bonds. FINRA found that the brokerage firm did not have the proper procedures and supervisory systems in place to ensure that all of the transactions were suitable for a number of these investors. Customers affected, in particular, are those with holdings that were heavily concentrated in Puerto Rico municipal bonds, as well as with holdings were highly leveraged via loan managed accounts or margin. FINRA said that from 1/2010 through 7/2013, 25 leveraged customers who had moderate or conservative investment objectives and modest net worths saw the securities they’d invested in sustain aggregate losses of nearly $1.2M. The customers had at least 75% of their assets in Puerto Rico securities that were ultimately liquidated to meet margin calls.