Last month, on September 17, 2013, Kiplinger warned investors of the dangers of Puerto Rican municipal debt. This month Massachusetts securities regulator William Galvin initiated an inquiry by contacting UBS, Oppenheimer and Fidelity’s FMR Co. regarding their sales practices related to the island’s bonds.
According to the Kiplinger article, Puerto Rico, which has population of less than 4 million people have outstanding government debt of $53 billion. The only states with more debt are New York and California. In case you wonder, those states have populations of 19.5 million and 38.2 million, respectively. The municipal debt per person is astronomical in Puerto Rico compared to New York and California. This equates to per capita debt of $11,000 in Puerto Rico. Compare that to the per capita income of $10,500 and it is easy to understand the reason there is a problem.
Kiplinger lists the following 20 funds with greatest exposure to Puerto Rican bonds:
Fund % in PR Bonds
Franklin Double Tax-Free Income A 65.9%
Oppenheimer Rochester VA Muni A 31.1%
Oppenheimer Rochester NC Muni A 30.6%
Oppenheimer Rochester MD Muni A 30.3%
Oppenheimer Rochester AZ Muni A 27.1%
Oppenheimer Rochester MA Muni A 26.5%
Oppenheimer Limited Term NY Muni A 26.2%
Oppenheimer PA Muni A 25.1%
Rochester Municipals A 24.8%
Oppenheimer Rochester Michigan Muni A 22.2%
Wells Fargo Advantage WI Tax-Free Inv 21.0%
HighMark WI Tax-Exempt A 20.4%
Oppenheimer NJ Muni A 20.2%
Oppenheimer Rochester AMT-Free NY Muni A 19.0%
Oppenheimer Rochester Ohio Muni A 15.9%
Nuveen MD Muni Bond I 15.0%
Nuveen CT Muni Bond A 14.5%
Nuveen WI Muni Bond A 14.1%
Nuveen VA Muni Bond A 13.5%
Western Asset Oregon Municipals A 13.5%
Brokers and brokerage firms have a duty to make suitable recommendations to investors. Given the problems Puerto Rico has had with its economy over recent years, it would not be suitable to recommend to conservative investors to invest in funds which had significant exposure to Puerto Rican municipal debt.
If you have suffered losses due to the decline of funds you own containing Puerto Rican bonds, you may be able to recover damages.
Rex Securities Law , located in Boca Raton, FL, provides representation to investors nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.
Rex Securities Law
561 391 1900