Puerto Rico COFINA Bond Losses: Puerto Rico Urgent Interest Fund Corporation Bonds

Did you lose money investing in Puerto Rico COFINA Bonds at the recommendation of your broker? If so, the attorneys at The White Law Group may be able to help you recover your losses through FINRA Arbitration.

As we told you in May, The US territory of Puerto Rico is in the process of  bankruptcy proceedings. This is the largest government bankruptcy since Detroit, Michigan, with close to $123 billion in debt.

Puerto Rico COFINA Bonds

Puerto Rico COFINA bonds or Puerto Rico Urgent Interest Fund Corporation Bonds, are attached to Puerto Rico’s sales tax. COFINA is a corporation that is owned and controlled by the Puerto Rican government. When it issues debt, the funds that will be used for repayment comes directly from sales tax revenue.

This is the main feature that distinguishes COFINA bonds from general obligations bonds. General obligation bonds or GO bonds are not tied to any specific funding mechanisms. Instead, those bonds are backed by the full faith and credit of the Puerto Rican government as well as the island’s constitution.

Puerto Rico’s ‘Sales and Use Tax’, which is the specific tax that supplies revenue for COFINA bondholders, charges a 7 percent fee on many different sales and transactions that are conducted on the island. The revenue raised by this 7 percent tax is as follows:

• 21.4 percent of the tax revenue (1.5 percent overall) goes to the local municipal government;
• 39.2 percent of the tax revenue (2.75 percent overall) goes to the state government; and
• 39.2 percent of the tax revenue (2.75 percent overall) goes to COFINA bondholders.

In the midst of the financial crisis, Puerto Rico bondholders are realizing these investments were a bad idea.  According to reports, some GO bondholders have brought lawsuits against Puerto Rico to try to get the island’s government to stop paying COFINA bondholders. According to their legal argument, COFINA bond payments were unconstitutionally diverting tax revenue, thereby damaging the interests of GO bondholders.

If successful, this lawsuit will cripple the value of Puerto Rico’s COFINA bonds.  Already many of the bonds have suffered substantial losses.

The White Law Group is investigating the liability that brokerage firms may have for improperly selling Puerto Rico COFINA Bonds.

Broker dealers are required to perform adequate due diligence on all investment recommendations to ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

Fortunately, FINRA does provide for an arbitration forum for investors to resolve such disputes and if a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be found liable for investment losses in a FINRA arbitration claim.

Free Consultation with a Securities Attorney

If you suffered losses investing in Puerto Rico COFINA Bonds, the attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that recommended the investment to you.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee. The firm represents investors throughout the country in claims against their brokerage firm.

For a free consultation with one of the firm’s securities attorneys, please call (888) 637-5510.

For more information on The White Law Group, visit www.WhiteSecuritiesLaw.com.