Additional Puerto Rico Firms Fined Over Trade Supervision Failure

UBS Puerto Rico bond funds

The Financial Industry Regulatory Authority (FINRA) has continued securities regulators’ campaigns against Puerto Rico-based firms for securities violations related to Puerto Rico funds. We previously blogged about the Puerto Rico securities regulator’s fine of UBS relating to UBS’s recommendations and sales of UBS Puerto Rico bond funds. We also blogged last week about S&P further cutting Puerto Rico’s credit rating to junk status, which you can read here.

This week, FINRA has fined two firms for violating securities rules in their management of Puerto Rico funds, and another for violating trade reporting requirements. FINRA fined Puerto Rico-based firms Oriental Financial Services Corp. and Popular Securities, Inc. $245,000 and $125,000, respectively, with possible additional restitution to settle findings that the firms failed to maintain and properly enforce supervisory procedures in the wake of Puerto Rico bond downgrades in 2012.

At issue here was the management of closed-end funds after being downgraded. According to FINRA, neither firm maintained or enforced effective procedures instructing their supervisors to review the concentrations of the securities in customer accounts. As is typically the case with regulatory settlements, neither brokerage firm was required to admit guilt as part of their settlements with FINRA.

Puerto Rico bonds have received a junk status credit rating and now sit five tiers below investment grade, and S&P has signaled that future downgrades may be on the horizon. If you have invested in Puerto Rico bonds or funds with either Oriental, Popular, or any other Puerto Rico brokerage firm, contact the attorneys at Dimond, Kaplan & Rothstein, P.A. We have extensive experience dealing with Puerto Rico bond investments of all types. Contact us to set up a consultation today at one of our local offices.