According to Investment News, the Financial Industry Regulatory Authority (FINRA) is investigating the $3.5 billion of general obligation bonds that Puerto Rico sold on March 11, 2014. Offering documents stipulate that the bonds be issued in minimum denominations of $100,000. However, some reports indicate smaller transactions have occurred. InvestmentNews says that data compiled by Bloomberg show as many as 75 transactions of less than $100,000. It is unclear if FINRA’s is specifically investigating these smaller trades.
According to the report, the bond sales will provide the U.S. Territory with enough money to get them through to June 2015, despite the islands $70 billion deficit. The tax-exempt bonds mature in 2035 and offer a surprisingly high yield of 8.727%.
According to The Wall Street Journal, the Government Development Bank for Puerto Rico (GDB) said the sale generated $16 billion in orders. The GDB intends to use about $1.7 billion of the proceeds to repay a portion of loans to the central government.
The White Law Group has been closely following the situation in Puerto Rico, here, and continues to investigate the liability some brokerage firms have for recommending Puerto Rico debt and closed end funds that invest in Puerto Rico debt to investors.
Broker-dealers are required to adequately disclose the risks associated with all investment recommendations, and to perform the necessary due diligence to determine if the investment is suitable for each individual client based on risk tolerance, investment experience, liquidity needs, net worth and financial objectives. Given what is known about Puerto Rico bonds, it appears that some broker-dealers failed in their fiduciary duty to their clients and may be liable for investment losses.
If you are concerned about your investment in Puerto Rico bonds and would like to speak to a securities attorney, please call The White Law Group’s Boca Raton, Florida office at 561-807-6804 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.