Popular Securities

FINRA Sanctions Oriental Financial Over Concentrated Customer Accounts in Puerto Rico Bond Funds

March 27, 2015 | by Staff Attorney

This is the second regulatory action that our firm has tracked concerning brokerage firms recommending concentrated positions in Puerto Rico bond funds without having appropriate supervisory system and procedures designed to identify and review concentrated securities purchases in Puerto Rico closed-end funds.

As we reported, The Financial Industry Regulatory Authority (FINRA) sanctioned Popular Securities, Inc. (Popular Securities) alleging between July 1, 2011, and June 30, 2013, Popular failed to establish and enforce a supervisory system and procedures designed to identify and review concentrated securities purchases in Puerto Rico municipal bonds and Puerto Rico closed-end funds. Now in a similar action, FINRA alleged that between July 1, 2011, and June 30, 2013, Oriental Financial Services Corp. (Oriental) failed to establish, maintain, and enforce, supervisory systems and procedures to identify and review concentrated securities purchases in Puerto Rico municipal bonds and Puerto Rico closed-end bond funds.

Oriental has been a F]NRA member since 1993 and is a subsidiary of OFG Bancorp. Oriental operates out of headquarters in San Juan, Puerto Rico and engages in a general securities business that focuses on Puerto Rico municipal securities and open and closed-end mutual funds. Oriental has 50 brokers located in 12 branch offices.

FINRA Arbitration Panel Awards BBVA Securities’ Investors $1.2 Million

November 8, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) Arbitration Panel has awarded damages to investors in the amount of $1.2 million in compensatory damages and cost of fees associated with the arbitration. The alleged claim was asserted against BBVA Securities of Puerto Rico, Inc. (BBVA Securities) and employees of the brokerage firm.

BBVA Securities is a brokerage firm in San Juan, Puerto Rico.

The Claimants asserted breach of fiduciary duty, unsuitable investments, churning and excessive trading, failure to supervise and gross negligence. These causes of actions related to allegedly unsuitable naked option trading strategy combined with the use of margin which caused losses in the investor’s accounts.

Gana LLP Investigates UBS Puerto Rico, Popular Securities, and Santander Securities Sales of Puerto Rican Bond Funds

October 8, 2013 | by Staff Attorney

The steep decline in prices of Puerto Rican bonds has caused local investors substantial investment losses in assets that many are claiming were sold to them as safe and secure bonds. According to a New York Times article, Puerto Rico’s woes stem from the fact that its 3.7 million residents have approximately $87 billion of debt outstanding (about $23,000 of debt for every man, woman, and child) and spiraling pension costs. Further, Puerto Rico has experienced a rapidly declining population and double-digit unemployment causing the debt to be left behind to a smaller and poorer population to shoulder the debt burden.

Bond losses have been so great that Puerto Rico has been effectively shut out of the bond market and is now financing its operations with bank credit and other short-term measures that are unsustainable. The commonwealth’s bonds are widely held by local mutual funds issued by Puerto Rico’s largest brokerage firms including UBS Puerto Rico, Popular Securities, Inc., and Santander Securities, Corp. If the situation continues to worsen some fear that Puerto Rico will need some sort of federal action and bailout, an action without precedent.

Investor loss estimate tied to the bond fund sell-off have reached hundreds of millions of dollars. However, an accurate tally of the total damages is impossible at this time. Some investors have begun filing claims against their brokerage firm claiming that the losses have substantially or completely wiped out their retirement savings. These investors have claimed that their brokerage firm sold the bond funds as safe, stable, income producing investments. However, the bond funds not only had concentrated credit risk in Puerto Rican securities but also, in the case of the UBS leveraged funds, employed leverage of over 53%, exacerbating the losses. Comparatively, municipal bond funds domiciled in the United States are allowed to use only about half as much leverage as employed by the UBS funds.