The Law Offices of Robert Wayne Pearce, P.A. is investigating claims in Puerto Rico involving leveraged Santander Securities closed-end bond funds. Many of Santander Securities' bond funds were highly leveraged, which means that the funds borrowed more money than investors contributed to the funds in order to attempt to increase the funds returns. On top of this, a number of complaints have been made that a number of Santander Securities brokers in Puerto Rico recommended that their clients borrow funds, either through traditional borrowing methods such as a personal or home equity loan or through a margin account, to invest even larger amounts into their proprietary funds.
Margin accounts allow investors to borrow money from their brokerage firm to purchase securities. The portion of the purchase price that the investor must deposit is called margin, and it is the investor's initial equity in the account. The loan from the firm is secured by the securities the investor purchases. If the securities on margin go down in price, the firm can issue a margin call, which is a demand that the investor repay all or part of the loan with cash, make a deposit of securities, or liquidate some of the securities in the account. Therefore, buying on margin amounts to getting a loan from the brokerage firm, which entails repaying the amount borrowed plus interest - even if you lose money. Some firms automatically open margin accounts with the account owner knowing.
Many of Santander Securities' closed-end bond funds containing Puerto Rican debt obligations have declined significantly due to the combination of leverage and margin, which exponentially increased losses for investors in when local interest rates suddenly increased and bond prices fell. As a result, a number of investors were forced to liquidate millions of dollars in the funds to meet margin calls. Nevertheless, investors may be able to recover their investment losses by filing Financial Industry Regulatory Authority (FINRA) arbitration claims against Santander Securities that would be heard in San Juan, Puerto Rico.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.