Klayman & Toskes, PA and Carlo Law Offices Issue Statement on Ruling Declaring Puerto Rico’s Recovery Act Unconstitutional

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  • February 9, 2015

SAN JUAN, Puerto Rico (Globe Newswire) – February 9, 2015 – The Securities Arbitration Law Firm of Klayman & Toskes (“K&T”), www.perdidasenbonospr.com/en/, and Carlo Law Offices, commented today on U.S. District Court Judge Francisco Besosa’s ruling that the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (“Recovery Act”) is unconstitutional pursuant to the Supremacy Clause of the United States Constitution. Judge Besosa permanently enjoined enforcement of the Recovery Act by government officials.

The court consolidated two cases filed by plaintiffs holding nearly $2 billion in bonds issued by the Puerto Rico Electric Power Authority (“PREPA”), who challenged the constitutionality of the Recovery Act.

“The Recovery Act was passed last June because the government is extremely concerned that all of Puerto Rico’s public corporations, not just PREPA, are heading for financial collapse. While we believe Judge Besosa’s ruling is correct, the harsh reality is that without the ability to restructure public corporation debt, the so called “option of last resort,” the risk of default has grown exponentially,” according to Klayman & Toskes securities attorney Steven D. Toskes.

According to Toskes, “all local brokerage firms, including UBS Financial Services of Puerto Rico (NYSE: UBS), Santander Securities (NYSE: SAN), Popular Securities (NASDAQ: BPOP), Oriental Financial (NYSE: OFG) and Merrill Lynch, a subsidiary of Bank of America (NYSE: BOA), sold the bonds of Puerto Rico’s public corporations, including PREPA. The firms over-concentrated investors in these bonds, which they touted as safe long-term investments. The investment risks, particularly the risk of default and likelihood of significant loss in value, were never disclosed to investors.”

Klayman & Toskes, PA and Carlo Law Offices are dedicated to the rights of Puerto Rico investors. Puerto Rico investors who suffered losses as a result of FINRA sales practice violations, including unsuitable investment advice and failure to supervise, may be able recover their losses in a FINRA arbitration claim.

About Klayman & Toskes
Klayman & Toskes, a leading securities and litigation law firm, practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors. The firm represents investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.

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