by Robert H. Rex, Esq.
On October 9th, 2013, Massachusetts Securities Regulator William F. Galvin announced that inquiry letters have been sent to Fidelity’s FMR Co., Inc.; Oppenheimer Funds (a unit of Massachusetts Mutual Life Insurance Co.; and UBS Financial Services in connection with the sale of Puerto Rican municipal debt.
The release makes the following points:
- Puerto Rico is currently on the verge of insolvency and many of its obligations are at or near junk rating, thus the risks associated with its municipal debt obligation are disproportionally high.
- Puerto Rican municipal debt obligations have been popular with retail investors because they have historically been accompanied by high yield and are exempt from all taxes – local, state and federal.
- Because of the advantageous yields and tax benefits many Massachusetts municipal bond funds have a high concentration of Puerto Rican debt.