For many mutual funds and individual investors who have looked to bonds issued by the Puerto Rican government are now suffering losses due to the financial dilemma that the government has sunk into in recent years. Though investors benefited from the handsome returns or high yields these bonds offered during a period of historically low interest rates, these same investors are now feeling the bite of losses in their portfolios.

The past several years have seen Puerto Rico struggling with compounding debt and economic decline, which have caused the value of Puerto Rico’s municipal tax-free bonds falling considerably. It was in September 2013 when Puerto Rico bond values began to decline sharply that investors who held these bonds also began to suffer massive losses.

Investors who seek remedy for their losses in Puerto Rico bonds need to file their disputes in Financial Industry Regulatory Authority, Inc. (FINRA) arbitration. This is the case, especially with those who have invested in a closed-end fund that held Puerto Rican debt or a high-risk/high-yield Puerto Rican bond without understanding the risks associated with the investment, if they hope to recover their losses.

According to the firm Erez Law, investors in the United States and Puerto Rico are filing FINRA arbitration claims against their brokerage firms for investments made in Puerto Rico bonds or bond funds on the advice of their financial advisor. Many of these investors were not adequately warned about the high risk nature of the bonds, and have suffered serious losses as a result. Investors may have a claim against the brokerage firm based on misrepresentation, unsuitability, breach of fiduciary duty and state and federal securities laws.

A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a financial advisor recommends a security to his customers, the financial advisor must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for the customer. The suitability of an investment for a particular individual is at the center of the investment process and one of the key duties owed by a broker to the customer. Thus, a firm may be held liable for its broker’s failure to recommend suitable investments to its customers.

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