Municipal bonds are a commonly-used source of revenue for governments: they are relatively stable, tax-free investments, and in times of rising interest rates, their value increases. Puerto Rico’s municipal bonds have been declining in value since 2013, and the recent declaration of municipal bankruptcy, along with devastating hurricanes like Maria, have led to an even steeper decline.
Investors who purchased these bonds, either directly or via closed-end bond funds created by financial firms like UBS, have felt the sting of the losses. The losses have been particularly frustrating in these funds as investors typically look to municipal bonds as relatively safe, stable investments.
To date, Puerto Rico has defaulted on over $200 million in bond payments and rating agencies have downgraded Puerto Rican municipal bonds to below investment grade, or “junk,” bond status. Obviously, therefore, the value of Puerto Rico’s municipal bonds (and any corresponding closed-end bond funds) has fallen dramatically. Making matters worse, many investors were overly-concentrated in the bonds based on their brokers’ promise that these were stable and safe investments.
Various regulatory bodies, like FINRA, have brought allegations against UBS related to its sales of Puerto Rico bond funds. These bodies have found that UBS failed to adequately supervise its clients’ accounts, leading to an over-concentration of municipal bond purchases. This lack of supervision, coupled with the unsuitability of the purchases, has led to significant losses for investors.
Who sold municipal bond funds to clients?
UBS is hardly the only firm to make unsuitable recommendations. You may be able to make a claim for negligence, breach of fiduciary duty, or failure to supervise if you invested in municipal bonds through:
- Merrill Lynch
- Morgan Stanley
- RBC Securities
- Wells Fargo
The Frankowski Firm provides comprehensive representation on behalf of investors who have lost money because of the collapse of Puerto Rico’s municipal bonds. If you or someone you know has lost money or was misled into the purchase of a Puerto Rico municipal bond or related bond fund, while a UBS customer or otherwise, please call The Frankowski Firm at 888.741.7503 or fill out this contact form.
Read related article: Puerto Rico Municipal Bonds Have Led to Serious Investor Losses