This arbitration arises out of a Santander stockbroker’s unsuitable investment decision with regard to the Claimants’ Santander investment account which was reinvested and overconcentrated in Puerto Rico, resulting in the Claimants suffering substantial monetary losses.
The Claimants were retired and only suited for a diversified portfolio of conservative, income producing investments which would supplement their social security income. The Santander stockbroker first contacted the Claimants in November of 2010, presenting himself as their new financial advisor due to their previous advisor’s leaving Santander to work with Merrill Lynch. The Claimants transferred nearly $600,000.00 in cash and securities to their new Merrill Lynch account, leaving one Santander closed-end fund, the First Puerto Rico Tax-Exempt Fund because it could not be transferred to Merrill Lynch. At the advice of their Santander broker, the Claimants simply held the First Puerto Rico Tax-Exempt Fund for several years.
After their Santander account had remained inactive for several years, the Santander broker decided to sell the Claimants’ entire position in the First Puerto Rico Tax-Exempt Fund and to then purchase 3 speculative Santander closed-end funds: First Puerto Rico Tax Exempt Maturity Fund III, First Puerto Rico Tax Exempt Target Maturity Fund IV, and First Puerto Rico Tax Exempt Maturity Fund V. He neglected to explain to the Claimants the reason for the investment switch and failed to provide them with any prospectus, offering memorandum, or other documents to explain the nature of the newly purchased funds.
The wrongful conduct of Santander Securities and its stockbroker includes the purchasing of the 3 unsuitable Santander closed-end funds and the broker’s decision to hold them in spite of market conditions (which included Puerto Rico’s ongoing political, fiscal and economic problems). Remarkably, the stockbroker’s decision to switch to the new Santander funds occurred just after Puerto Rico credit markets were downgraded to one notch above “junk” status!
The Santander stockbroker’s recommendations, acts and omissions were in violation of FINRA Rules of Conduct 2110, 2111 (f/k/a 2310) and 2120, which govern standards of commercial honor and principles of trade, suitability, and use of manipulative, deceptive or other fraudulent devices.
Santander Securities was obligated to implement a system of supervision to assure compliance with Federal and Puerto Rico law, as well as FINRA conduct rules. However, at no time did any supervisory or compliance personnel ever question the over-concentration of Puerto Rico securities in the Claimants’ account.
Santander Securities is responsible for its own wrongs and vicariously liable for the acts and omissions of its stockbroker. Accordingly, Santander violated and is vicariously liable for violations of the FINRA Code of Conduct and Uniform Securities Act of Puerto Rico and for common law fraud, constructive fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, negligent management, negligent supervision of its employees, and fraudulent concealment of its misconduct.
For dedicated representation by a law firm with over of experience in all kinds of investment related disputes, a firm that knows how to handle these Puerto Rico bond fund cases, contact us by telephone at 561-338-0037 or toll free at 800-732-2889 or via e-mail. We may also be able to arrange a meeting with you at offices located in San Juan, Puerto Rico or in Boca Raton, Florida.