What is the duty of a fiduciary? A recent case involving a broker-dealer firm in Puerto Rico is raising the issue
According to the Uniform Securities Act of Puerto Rico, broker-dealers and investment advisors in the commonwealth “must observe the highest standards of fiduciary duty toward their customers and clients.” But not all firms seem to adhere to this rule. Case in point is, potentially, Oriental Financial Services.
Based in San Juan, Oriental Financial recently sent a letter to one of its customers regarding an arbitration claim filed earlier this year with the Financial Industry Regulatory Authority (FINRA). Essentially a break-up letter from president Sean Miles, it informed the client that Oriental and “its agents, employees, parent and affiliates withdraw and disclaim any and all investment advice with regard to your accounts, including but not limited to the Puerto Rico securities.”
“Since you made the investment in Puerto Rico securities,” the letter went on to say, “you sought independent legal counsel and/or financial advice, and brought the referenced claim. Thus, you are fully aware of the risks alleged by you with regard to your investment in Puerto Rico securities, at least since the filing of your statement of claim. The referenced claim shows that it is your belief that these are not safe, prudent and/or suitable investments. Further, it is your belief that you should not have purchased or should not hold investments in Puerto Rico securities. Therefore, you continue to have a legal duty to mitigate losses arising from your investment in Puerto Rico securities.”
Basically, Oriental is telling the client that it is their own fault that they are in this situation and don’t intend to do anything to help, which can be considered a breach of fiduciary duty.
“I’ve seen letters from broker-dealers saying we no longer wish for you to be a customer and close the account in 30 days, but you can’t disavow your fiduciary duty,” said Scott Silver in a recent Investment News story. “That is impermissible and creates a unique issue in Puerto Rico.”
Fiduciary duty is not something to be taken lightly. Someone tasked with being a fiduciary – as brokers in Puerto Rico are – is obligated to act in the best interests of their clients and maintain the highest degree of loyalty and honesty. A breach of this duty is a serious charge, and it can have severe ramifications for clients. It can also lead to FINRA arbitration, as it did in this case.
Arbitration through FINRA is often the best way to recover lost money. If a broker with Oriental Financial Services handled your investments and you think they could be guilty of a breach of fiduciary duty, the Silver Law Group may be able to help you get money back. For a free consultation, call us at 800-975-4345 or just fill out our online contact form. We work on contingency basis, so there is no fee unless you recover money.