Massachusetts is investigating the sale of Puerto Rico bonds by three major financial firms.
Massachusetts secretary of the commonwealth William Galvin on Wednesday sent inquiry letters to Fidelity Investments, Oppenheimer Funds and UBS Financial Services. Fidelity is based in Boston and Oppenheimer is a unit of Massachusetts Mutual Life Insurance Co.
Galvin’s securities division is looking at whether Massachusetts investors were made adequately aware of the investments’ risks and whether they were kept up to date about Puerto Rico’s changing financial situation. The division will also look at whether the bonds have been properly priced. More often than not the bonds were sold in muni mutual funds or other investment vehicles, Galvin said.
Many Massachusetts-focused municipal bond funds have a high concentration of Puerto Rico debt, Galvin said.
In the aftermath of Detroit’s bankruptcy and critical media stories this summer, the price of Puerto Rico’s bonds have declined significantly on the secondary market. The island’s general obligation debt currently is rated one notch above speculative ratings by all three major rating agencies.
The investments of some of Oppenheimer’s mutual funds in Puerto Rico municipal bonds “are disclosed and discussed at length in the funds’ public diclosures,” OppenheimerFunds Rochester said in an email to The Bond Buyer. “OppenheimerFunds has contacted the secretary’s office and is cooperating fully with its inquiry.”
Fidelity and UBS did not immediately respond to requests for comment.