Crosby & Higgins LLP Launches Investigation of Puerto Rico Municipal Bond Market Collapse
July 24, 2014
Puerto Rican municipal bonds have become increasingly attractive to U.S. investors over the past few years given their tax-exempt status and the potential for high yields. Puerto Rico is the third largest municipal bond issuer in the U.S., and it is currently carrying $70 billion in public debt. While Puerto Rico has been struggling with its debt for a number of years, recent prospects for economic improvement have become significantly grimmer for the commonwealth. In February of 2014, all three major credit ratings agencies–Standard & Poor’s Rating Services, Moody’s Investors Services, and Fitch Ratings–downgraded Puerto Rico’s general obligation bonds to junk-bond status. Subsequently, numerous mutual funds with high exposure to Puerto Rico municipal bonds began selling their holdings; particularly those funds that are not permitted to hold municipal bonds below investment-grade status. The avalanche of selling has been a disaster for many investors who continue to hold these investments.
Although the downgrades of Puerto Rican bonds to junk-bond status occurred within a matter of weeks, the impending threat of collapse appears to have been far from a surprise to investment professionals, as warning signs began to surface as early as 2012. Despite this, the evidence thus far suggests that many financial advisors failed to disclose to investors the rising tide of risks associated with these bonds—information which would have enabled investors to avoid the losses that have resulted. The attorneys at Crosby & Higgins LLP have significant experience prosecuting claims on behalf of clients who were victims of dishonest investment activities, including misrepresentations and the failure to disclose material risks in connection with investments. In fact, Crosby & Higgins LLP was at the forefront of litigation against firms arising out of the purchase and sale of auction rate securities that were deceptively marketed to investors as safe, liquid investments, despite the firms’ knowledge that the auction market was volatile and would eventually collapse. For many investors, the facts here appear to be unfortunately similar.
Crosby & Higgins LLP’s investigation is ongoing and it welcomes inquiries by investors who have sustained a possible loss in connection with the downgrade of Puerto Rican municipal bonds. If you have any questions or would like to discuss a potential claim with one of our attorneys, please feel free to contact us directly at 646-452-2300.
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