WASHINGTON – The Senate has unanimously approved a bill that would extend a federal law governing U.S. mutual funds, exchange-traded funds and hedge funds to cover those funds in Puerto Rico and other territories as well.
The U.S. Territories Investor Protection Act (S. 484) was sponsored by U.S. Sen. Bob Menendez, D-N.J., and is similar to a bill pending in the House that was introduced earlier this year by Rep. Nydia Velazquez, D-N.Y.
The Senate’s action comes after some investment banking firms in Puerto Rico underwrote the commonwealth’s bonds then repackaged those same bonds into mutual funds they sold exclusively to investors on the island. This took place while Puerto Rico was spiraling downward toward a massive fiscal and debt crisis. The bonds lost value and investors suffered huge losses.
The bill would expand the Investment Company Act of 1940 to cover Puerto Rico and all U.S. territories, protecting investors who reside there from investment company abuses.
Both Menendez and Velazquez were members of the bipartisan, eight-member Congressional Task Force on Economic Growth in Puerto Rico that was established by the PROMESA law to help find ways to help combat the commonwealth’s fiscal and debt crisis. That task force released a report in late 2016 recommending the enactment of this legislation, among other things.
Menendez stressed in a release that the bill would not provide Puerto Rican investors and retirees with special treatment but rather would put them on a par with U.S. investors.
“With the passage of this commonsense legislation, and as Puerto Rico continues to face an economic crisis of historic proportions, we have come one step closer to correcting their hard-earned savings due to an outdated and unfair exemption in our federal securities laws,” Menendez said.