June 1, 2017 Comments (0) Current Investigations

COFINA Bonds Securities Fraud Investigation

COFINA bonds
(Last Updated On: June 28, 2017)

Investigating Potential Claims involving COFINA Bonds

Have you suffered losses investing in Puerto Rico COFINA Bonds at the recommendation of your broker? If so, the attorneys at The White Law Group may be able to help you recover your losses through FINRA Arbitration.

What are COFINA bonds?

The Puerto Rico Sales Tax Financing Corporation (by its Spanish acronym, COFINA) is an independent instrumentality of the Commonwealth of Puerto Rico, created by Act No. 91 of May 13, 2006.  COFINA provided a definite and secure repayment mechanism of some $6.8 billion in debt that previously lacked a source of repayment.

According to the Puerto Rico government’s website, COFINA issued Puerto Rico Sales Tax Revenue Bonds to provide funds for the Commonwealth of Puerto Rico to repay certain debt obligations to the GDB and PFC. The bonds, issued under resolutions adopted by COFINA’s board of directors will be payable from and secured by a security interest created by the Resolution in a specified portion of the newly created sales tax.

Legislation enacted in 2006 approved for the first time in Puerto Rico a sales and use tax (SUT) of 5.5% for the benefit of the central government and a separate 1.5% for the benefit of municipalities of Puerto Rico. Act 91 also created a Dedicated Sales Tax Fund, to be held and owned by COFINA separate and apart from the central government’s General Fund, and provided, among other things, that each fiscal year the first receipts of the Commonwealth’s Sales Tax, in the amount specified in the law, be deposited in this special Dedicated Fund and applied to the payment of the Sales Tax Revenue Bonds. On July 1, 2015, the total SUT was increased to 11.5%.

Bankruptcy Fallout

COFINA bonds have been falling in price since U.S. District Judge Laura Taylor Swain was appointed to preside over the bankruptcy-like proceedings initiated in early May.

On May 30, the Judge Swain ordered a trustee not to make a $16 million interest payment to Puerto Rico COFINA bondholders. Even though Puerto Rico had defaulted on millions worth of bonds, the COFINA bonds have somehow managed to stay current.

The stay on interest payments allows the competing claims of owners of the general obligation bonds (GO Bonds) to be litigated, according to reports.

GO bondholders believe they have first claim on all of the Commonwealth’s sources of revenue. COFINA bond holders maintain that the Puerto Rico Constitution states that COFINA bonds have first claim on sales tax revenues, something which was of little dispute in the bond market, until Puerto Rico defaulted on GO debt.

Litigation will be the decision maker of the value of the COFINA bonds. Many of the bonds have already suffered substantial losses.

Recovery of Investment Losses in COFINA bonds

The White Law Group is investigating the liability that brokerage firms may have for improperly selling Puerto Rico COFINA Bonds.

Broker dealers are required to perform adequate due diligence on all investment recommendations to ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

Fortunately, FINRA does provide for an arbitration forum for investors to resolve such disputes and if a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be found liable for investment losses in a FINRA arbitration claim.

If you suffered losses investing in Puerto Rico COFINA Bonds, the attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that recommended the investment to you.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. The firm represents investors throughout the country in claims against their brokerage firm.

For a free consultation with one of the firm’s securities attorneys, please call (888) 637-5510. For more information on The White Law Group, visit www.WhiteSecuritiesLaw.com.