In this website, lawyer Peter Mougey details the lawsuit against Banco Santander arising out of the Puerto Rico potential municipal bond fraud. Santander recommended that many of its clients take concentrated positions in closed-end Puerto Rican municipal bond funds. Because of Santander's unsuitable recommendations, many investors have lost their retirement savings and their homes.
What is the Santander Puerto Rico Bond Lawsuit
Puerto Rico's economy has been in a decline for years. In an effort to boost its economy, Puerto Rico and its agencies doubled their borrowing in the municipal bond market to $70 billion in a ten-year-period, as of 2013. Santander Puerto Rico helped to exacerbate the impending economic disaster by allowing investors to lose billions in Santander Puerto Rico municipal bond funds.
Specifically, Santander encouraged investors to over-concentrate in the high-risk, illiquid, closed-end municipal bonds of Puerto Rico without properly disclosing the risks of the investment or considering its suitability for the investors' actual goals. Many Santander clients were forced to liquidate their life savings to meet margin calls on the bond funds. These victims have been left with nothing.
Santander Puerto Rico inappropriately recommended that investors concentrate their portfolios in closed-end Puerto Rican municipal bond funds. The closed-end funds were not diversified. The clients holding a high percentage of their liquid net worth in the closed-end funds and individual Puerto Rican bonds were exposed to too much risk.
Santander, as the investment advisor to many of the closed-end funds, purchased high-risk individual bonds on leverage of more than 50%. In comparison, many U.S. municipal bond funds are generally only leveraged at about 22%. Also, Santander's definition of 50% leverage is confusing at best.
What it really means is that for every dollar held of investor assets, another dollar is invested with borrowed money. For every dollar invested, another dollar is borrowed and two dollars is used to purchase bonds. As a result, 100% of the equity (the initial dollar) is leveraged. A 25% decline in the total investment is actually a 50% decline in the amount initially invested. This strategy dramatically increases risk.
Santander financial advisors also encouraged investors to buy bonds and bond funds with lines of credit. In normal circumstances, if an investor buys securities on borrowed money, it is through a margin loan, which is regulated and limits the risk an investor can take. Santander financial advisors were incentivized to encourage lines of credit because they could receive a commission on the line of credit and the securities purchased.
Who is Santander
The Santander Group is a banking and finance conglomerate, built around Santander. Based in Spain, it is one of the largest banking concerns in the world, with assets of over €1.25 trillion ($1.36 trillion USD), operating in Europe, Asia and the Americas.
Among other services, the Santander Group offers investments and financial advice to investors. Santander Puerto Rico is headquartered in the capital city of San Juan, with branches in cities and towns across the island.
How Did Santander Potentially Defraud its Investors
Puerto Rican-based financial advisers have recommended and aggressively promoted Puerto Rican municipal bonds and closed-end funds containing the same investments. As a result, an overwhelming number of Puerto Rican investors held large, geographically concentrated investments. Broker-dealers such as UBS and Santander touted the tax advantages, while failing to disclose the significantly higher, unnecessary risks.
Unfortunately, the island's economic situation has changed significantly for the worse over the past decade. This is due to numerous factors, including the phasing out of U.S. government programs and incentives, free trade agreements that have caused Puerto Rican industries to relocate elsewhere and the volatility of oil and food prices. Wall Street investment banks continued to advise Puerto Rican officials that bond issuance would keep the country running.
The government of Puerto Rico continued to borrow heavily by issuing bonds. Because of economic conditions, the island has found it increasingly difficult to meet these debt obligations. For the last several years, Puerto Rico has been issuing bonds simply to service its sovereign debt, now standing at over $70 billion.
The government of Puerto Rico is now unable to make full payments on this debt when payments come due. The island territory has already defaulted and will continue to default on its payments without some kind of intervention on the part of the mainland.
Financial advisers at Santander Puerto Rico, like those at UBS, were aware of the increasing risks, but continued to steer clients into these high-risk concentrated positions. Furthermore, they continued to do so even after Santander had liquidated all the company's own Puerto Rican fixed income holdings prior to the decline. Through its liquidation, Santander virtually eliminated its own exposure, while allowing clients to suffer huge losses in their own life savings.
Mike Papantonio Exposes the Crash of Puerto Rico & Santander Potential Fraud
Which Bond Funds Are Subject to the Santander Puerto Rico Lawsuit
The following Santander bond funds are under investigation:
- First Puerto Rico AAA Fixed Income Fund
- First Puerto Rico AAA Target Maturity Fund I
- First Puerto Rico AAA Target Maturity Fund II
- First Puerto Rico Target Maturity Income Opportunities Fund
- First Puerto Rico Target Maturity Income Opportunities Fund I
- First Puerto Rico Target Maturity Income Opportunities Fund II
- First Puerto Rico Tax Advantage Target Maturity Fund I
- First Puerto Rico Tax Advantaged Target Maturity Fund II
- First Puerto Rico Tax-Exempt Target Maturity Fund II
- First Puerto Rico Tax-Exempt Target Maturity Fund III
- First Puerto Rico Tax-Exempt Target Maturity Fund IV
- First Puerto Rico Tax-Exempt Target Maturity Fund V
- First Puerto Rico Tax Exempt Target Maturity Fund VII
- First Puerto Rico Tax-Exempt Fund
- First Puerto Rico Tax-Exempt Fund II
- First Puerto Rico Daily Liquidity Fund
Free Confidential Consultation -- CLICK HERE
Have There Been Any Settlements Arising Out of the Santander Puerto Rico Bond Issues
In late 2015, the Financial Industry Regulatory Authority (FINRA) ordered Santander to pay it $6.4 million in fines and restitution. Levin Papantonio is currently accepting cases from investors who had large concentrated positions in Puerto Rican securities, and our firm is pursuing litigation against Santander to get the investors' money back. Litigation against Santander is in its early stages. Cases such as this can take as little as twelve months, but may take up to two years to resolve.
How Long Do I Have to File a Lawsuit Against Santander
The law provides various time limitations in which claims must be filed to recover for investment fraud or neglect. These time restrictions are known as statutes of limitations. If a claim is not filed against an investment company and advisors before the statute of limitation expires, the injured investors are forever prevented from bringing a claim against the entities and persons who may be liable for causing the losses.
If you have suffered losses because of potential Santander Puerto Rico bond fraud or neglect, your statute of limitations may already have expired, or may expire in the very near future. Unfortunately, there is no way for us to tell you without first reviewing the individual facts of your situation. The one thing we can absolutely state is that every day you wait to retain an attorney may be the last day you can bring a claim.
Why Should I Choose Levin Papantonio to Handle my Santander Case
Levin Papantonio has been in existence for 60 years, and is recognized as one of the preeminent law firms in the United States. Based on law firm verdicts and settlements exceeding $3 billion, our securities fraud lawyers are committed to seeking justice for the victims of investment fraud and misconduct.
Led by attorney Peter Mougey, the past President of the national securities bar PIABA, our Securities and Business Tort Department has represented more than 1,500 investment fraud victims across the country in state and federal court and securities industry arbitration.
For a detailed discussion of our history, credentials, accomplishments and results, please visit our About Us section.
What Does it Cost to Hire Levin Papantonio
Our investment fraud lawyers provide absolutely free confidential consultation, and if we are fortunate enough for you to hire us, we never will charge you any fees or costs unless you first recover.
An initial consultation and case evaluation costs you nothing. We take clients on a contingency basis, meaning that if we win your case, our fee will be based on a percentage of what we recover for you (generally, this is between 30% and 40%).
To contact us for a free confidential consult, you can call us at (800) 277-1193 (toll free). You also can request a private and confidential consultation by clicking Free & Confidential Consult, which form will be immediately reviewed by one of our attorneys handling this litigation.
Santander Puerto Rico Bond Lawsuit News
Santander Becomes Target of Puerto Rican Anger Over Bond Losses: "'They protected themselves and sold their positions but left their clients holding the bag,' said Peter Mougey, a Florida-based attorney at Levin Papantonio who represents local investors filing FINRA claims against the banks." To read more, click Bloomberg
FINRA Sanctions Santander Securities LLC $6.4 Million for Supervisory Failures Related to Sales of Puerto Rican Bonds: The Financial Industry Regulatory Authority (FINRA) announced today that it ordered Santander Securities LLC to pay approximately $4.3 million in restitution to certain customers who were solicited to purchase Puerto Rican Municipal Bonds (PRMBs). Additionally, the firm will pay restitution of $121,000 and make offers of rescission to buy back the securities sold to certain customers impacted by the firm's failure to supervise employee trading. FINRA also censured and fined Santander $2 million for supervisory failures related to sales of PRMBs and Puerto Rican closed-end funds, and for failing to reasonably supervise employee trading in its Puerto Rico branch office. To read more, click Financial Industry Regulatory Authority
Santander to Pay $6.4 Million in Puerto Rico Bond Settlement: For the second time in less than a month, a global bank with operations in Puerto Rico has agreed to pay millions of dollars to settle accusations that it violated industry rules when selling the island’s bonds to customers. Santander Securities, a subsidiary of Santander, will pay $4.3 million in restitution to clients on the island who lost money on Puerto Rican bonds, according to the Financial Industry Regulatory Authority, known as Finra. To read more, click New York Times
First UBS, Now It’s Santander in Hot Water Over Alleged Puerto Rico Bond Fraud: The slow-motion train wreck that is the Puerto Rican economy is a disaster that was decades in the making – and the financial services industry was surely aware of it. Rico owes more than $70 billion. The territory’s public agencies are rife with corruption. On top of that, virtually every U.S. credit rating agency has downgraded Puerto Rico bonds to junk territory, and Governor Alejandro Padilla himself has stated that his island will be unlikely to meet its obligations. These were clear signals that concentrated investments in Puerto Rican securities were a very bad idea. To read more, click The Ring of Fire