Former Popular Securities, LLC Client Wins FINRA Arbitration for $250,000 for Puerto Rico Bond Losses
Posted on Wednesday, May 2nd, 2018 at 9:42 pm
In March 2018, a former client of Popular Securities, LLC won an award in a FINRA arbitration for compensatory damages for $200,000 and $50,000 in attorney fees for losses sustained from Puerto Rico closed-end funds and individual Puerto Rico bonds in Claimants’ accounts. The investors were clients of financial advisor Alfredo Gonzalez (CRD# 4513548).
The causes of action included federal securities acts violations; fault; fraud; deceit; recklessness; negligence; and rescission of contracts. The causes of action relate to the purchase of Puerto Rico closed-end funds and individual Puerto Rico bonds in Claimants’ accounts. The FINRA arbitration hearing was conducted in San Juan, Puerto Rico.
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history. This filing came about after Governor Ricardo Rossello failed to persuade Puerto Rico’s creditors to settle for a reduced payment amount, the government faced new lawsuits pending from their defaults, and the proposed 10-year fiscal plan only (see our previous post here) that was approved in March 2017 covered a quarter of the debt payments necessary for the island.
Gonzalez has been registered with J.P. Morgan Securities LLC in Pinecrest, Florida since 2014. Gonzalez has also been the subject of five additional customer complaints between 2015 and 2018, one of which was closed without action, according to his CRD report:
January 2018. “Claimant alleges that Financial Consultant investment recommendations to purchase and to hold P.R. securities were unsuitable in light of the clients’ risk tolerance. Claimants also allege that recommendations made by the Financial Consultant were particularly egregious in light of Puerto Rico’s well known deteriorating financial condition.” The customer is seeking $135,000 in damages and the case is currently pending.
July 2016. “Claimant alleges that Financial Consultant recommended that he purchase Puerto Rico bonds and both Puerto Rico open-end and closed-end mutual funds, resulting in an over-concentrated and high risk portfolio, which was unsuitable in light of his stated risk tolerance. Claimant also alleges that Financial Consultant failed to advise him to diversify his portfolio and to sell high risk positions, and that he explicitly recommended that Claimant continue to hold such positions. Finally, Claimant alleges that Financial Consultant made misrepresentations about material facts regarding certain of the Puerto Rico mutual funds.” The customer is seeking $586,481 in damages and the case is currently pending.
June 2016. “Claimants allege that Financial Consultant’s investment recommendations to purchase and to hold P.R. closed-end funds and P.R. bonds resulted in an over concentrated and high risk portfolio, which was unsuitable in light of the clients’ stated risk tolerance and investment objectives. Claimants also allege that Financial Consultant failed to diversify their portfolio and made misleading representations regarding the products’ risks and liquidity. Claimants also state that the Financial Consultant recommended that Claimants borrow against the securities using margin loan that lead to the economic losses sustained by Claimants. Claimants allege that Financial Consultant manipulated their stated profile and investment objectives in the New Account Documents to falsely increase the classification of their risk tolerance.” The customer is seeking $20,000,000 in damages and the case is currently pending.
September 2015. “Claimants allege that Financial Consultant investment recommendations to purchase and to hold P.R. closed-end funds and P.R. bonds resulted in an over concentrated and high risk portfolio, which were unsuitable positions in light of the clients’ risk tolerance.” The customer is seeking $1,426,000 in damages and the case is currently pending.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Popular Securities, LLC may be liable for investment or other losses suffered by Gonzalez’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.