SLCG releases its updated Puerto Rico Securities Arbitration Report showing over $600 million paid out so far in settlements and awards with a similar amount likely to be paid out in coming years as a result of brokerage firm customers losses in Puerto Rico.

In 2013, a shrinking economy and the government’s loss of continued access to capital markets necessary to make interest payments, refinance principal coming due and to fund an unsustainable government deficit caused Puerto Rico tax exempt bond prices to fall substantially.

Puerto Rico brokerage firms’ customers held poorly diversified securities accounts, concentrated in Puerto Rico municipal bonds or closed end funds that held leveraged portfolios of Puerto Rico municipal bonds. Often these accounts were further leveraged using margin debt, lines of credit or proceeds from non-purpose loans recycled through third-party banks.

In our previous research, we ranked brokerage firms based on the proportion of their brokers on December 31, 2015 who had been associated with at least one resolved customer complaint. That approach assigns a higher ranking to a firm if a larger proportion of its current brokers have one or more resolved customer complaint in their career, regardless whether the complaints occurred at their current employer or at a prior employer.

Our new research ranks brokerage firms based on the frequency of customer complaints over conduct at each firm, including both resolved and pending. That is, we rank firms based on their history rather than on their current brokers’ histories.