Erez Law recently filed a $330,000 FINRA arbitration against Hennion & Walsh for losses sustained from investments in high risk Puerto Rico bonds.
The Erez Law customer alleges that John Tsoukala (CRD #4428102), who has been a registered representatives of Hennion & Walsh in Parsippany, New Jersey since 2001, recommended his client invest in unsuitable Puerto Rico bonds.
The client was primarily interested in investments in high quality fixed-income securities and largely avoided equities. Despite her risk aversion and interest in high quality fixed-income investments, Tsoukalas recommended high risk, uninsured and unsuitable Puerto Rico bonds with unacceptable results.
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.
To make matters worse, after Hurricane Maria devastated the island in September 2017, Puerto Rico debt fell by 4%, the biggest weekly drop since July 2015. This sharp fall came after Governor Alejandro GarcÃa Padilla announced that Puerto Rico would ask bondholders to take less than what they were owed.
It is alleged that Tsoukalas led the client to believe that the Puerto Rico bonds he recommended were high quality fixed-income investments. According to the statement of claim filed by Erez Law, Erez Law alleges that Tsoukalas recommended the client invest in excess of $330,000 in high risk, unsuitable and uninsured Puerto Rico bonds.
Hennion & Walsh could have offered the client only insured Puerto Rico bonds, which would have generated very similar returns without the exposure to solely Puerto Rico credit risk and the client would have avoided the losses she unnecessarily sustained, as the insured bonds have generally not sustained losses.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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