Friday, October 11, 2013

Sallah Astarita & Cox Reviewing Potential Claims Against Other Brokerage Firms for Investments in Puerto Rico Municipal Bonds

Our office has learned that at least one State Attorney General is requesting information from multiple brokerage firms regarding the possible use, or overuse, of municipal bonds from Puerto Rico as part of their proprietary mutual funds. We are following those investigations for potential recovery for investors who have suffered municipal bond losses.
Puerto rico state

We are currently investigating claims against UBS in its Puerto Rico Bond debacle. That investigation is focused more on sales practices and the use of the bonds, and how same were presented to investors. We blogged about the UBS Puerto Rico Bond Funds earlier in the week.

This new, broader investigation, has a different focus, and involves multiple firms. Puerto Rico bond prices have been in a free fall amid renewed fears about the island's deficits, spending and high unemployment. The S&P Municipal Bond Puerto Rico Index is down 19 percent in 2013. The index is badly under-performing the S&P National AMT-Free Municipal Bond Index, which is down only 3.6 percent this year.

The bonds have been popular with portfolio managers because they are triple tax exempt - they are exempt from federal, state and local income tax in all US states. However, questions are now being raised as to whether the Puerto Rico bonds were over-used in the mutual fund portfolios, and whether investors were advised of the additional risks being incurred by the inclusion of the Puerto Rico bonds in the portfolio.

Investigators are looking into the disclosures by US brokerage firms as to the use of the bonds. It is believed that some funds have over 15% of their portfolio in Puerto Rico municipal bonds.

Investors who have suffered losses in a municipal bond portfolio are encouraged to contact our office for a no-obligation review of their holdings and potential claims. Email our office at, or call us at 212-509-6544.
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