FINRA Announces UBS Puerto Rico Bond Fund Cases to Move Forward

On Monday, April 14, 2014, the Financial Industry Regulatory Authority (FINRA) announced that it would lift the hold that it had put on some cases related to the collapse of Puerto Rico Bond Funds.

FINRA has been able to expand its pool of arbitrators that will be available to hear the cases. There are approximately 700 eligible arbitrators on its roster who have agreed to serve in Puerto Rico, where the majority of the 209 cases received to this point, are to be heard.

Last summer, investor fears began to rise when Detroit filed for bankruptcy. Investors, seeing a city go bankrupt, became concerned with Puerto Rico’s $70 billion in municipal debt. As fear set in, investors in the UBS Puerto Rico family of closed-end municipal bond funds began to lose billions. Nineteen of these funds lost $1.66 billion during the first nine months of 2013.

The imploding bond market initiated a surge of claims against the broker-dealers that sold the bonds including brokerage firms UBS, Santander Bank, and Bank of America Merrill Lynch.

FINRA has not only faced the issue of having enough arbitrators to hear all of the cases, but has needed to find a way to overcome the language barrier, with the majority of investors speaking Spanish as their first language. FINRA has come to a resolution with UBS and Bank of America Merrill Lynch, who have agreed to pay all fees for translators.

FINRA is poised to hear all the cases. “We are really confident that we will have enough arbitrators to handle all the cases that go to hearing,” said Linda Fienberg, president of FINRA dispute resolution. “We’re continuing our campaign to find additional arbitrators,” Fienberg said. “We will have staff in Puerto Rico this month talking with a series of professional groups who have expressed an interest” in serving as an arbitrator. Fienberg said a letter was sent out on Monday to all parties involved in the cases informing them that the hearings will move forward.

In a note published on Monday, FINRA has said that it will not be changing or modifying its venue rule, which states that arbitration hearings are to be held at a location closest to where the investor resides absent a mutual agreement of both parties. Despite the push to have some of these cases heard in the southeast region of the United States, FINRA is keeping its rule in place and requiring the hearings to be heard in Puerto Rico.

The attorneys at Gana Weinstein LLP are experienced in handling claims involving the Puerto Rican UBS Bond Funds.  Our consultations are free and we welcome all inquiries.

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