Massachusetts weighs Puerto Rico debt impact on mutual funds

Massachusetts’ chief securities regulator will open an inquiry into the impact of Puerto Rican debt on the state’s mutual fund investors. More

To continue reading this article, please do one of the following.



regulation

Massachusetts weighs Puerto Rico debt impact on mutual funds

Posted 10/10/13

NEW YORK - Massachusetts’ chief securities regulator will open an inquiry into the impact of Puerto Rican debt on the state’s mutual fund investors.

The investigation is meant to determine the extent of investors’ risk tied to the island’s weakening municipal debt obligations, Massachusetts Secretary of the Commonwealth William F. Galvin said today in a statement.

“Puerto Rico is currently on the verge of insolvency and many of its obligations are at or near junk rating,” according to the statement. “The risks associated with its municipal debt obligation are disproportionally high.”

Interest on debt issued by Puerto Rican governments is typically tax-free across the U.S., and yields on some issues topped 10 percent in recent weeks amid doubt about whether investors will be repaid. The bonds’ high yields and tax-exempt status make them popular with retail investors, according to the statement.

Galvin sent letters of inquiry to Fidelity Investments, OppenheimerFunds Inc., a unit of Massachusetts Mutual Life Insurance Co., and UBS Financial Services. The intent is to determine if and when investors were apprised of the risks of investing in Puerto Rico.

“OppenheimerFunds has contacted the secretary’s office and is cooperating fully with its inquiry,” the company said in an emailed statement. Spokesmen for Fidelity and UBS AG declined to comment.

Administrative leave

UBS said last week that it put an employee on administrative leave while the Zurich-based bank reviews loans issued to clients. One brokerage customer said he was given credit to buy risky bond funds holding the island’s government debt.

Investors in the $3.7 trillion municipal market are punishing Puerto Rico even after the nine-month-old administration of Governor Alejandro Garcia Padilla boosted pension contributions and raised taxes to keep the territory’s obligations from being cut to junk. His challenge is compounded by a shrinking local economy.

Garcia Padilla, 42, of the Popular Democratic Party, took office in January. He traveled to New York this week to discuss his fiscal and economic initiatives with ratings companies. Puerto Rico is graded one step above junk by the three major rating firms, with a negative outlook, and is preparing to borrow as much as $1.2 billion by year-end to balance budgets.

Calendar
PBN Hosted
Events

Please join PBN on September 10th for the 3rd Annual Fastest Growing & Innovative Companies program at Rosecliff Mansion in Newport. Seating is limited so be sure to register early.
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News
    Advertisement