Erez Law is currently representing investors in FINRA arbitration claims related to former Morgan Stanley financial advisor Angel Aquino (CRD# 2687333). His former customers allege that he was dangerously concentrating their investment portfolio in high risk and unsuitable Puerto Rico bonds. The Miami, Florida broker was with Morgan Stanley from 2010 to 2017. In July 2017, he was terminated from Morgan Stanley.
Erez Law and co-counsel Aldarondo & Lopez Bras filed a FINRA arbitration on behalf of a former customers of Aquino. The clients, who are residents of Puerto Rico, alleged that they entrusted Aquino with their irreplaceable life savings. The couple, who were not looking for high-risk investments, wanted to preserve their principal and generate modest income, which they were relying on to provide for their living expenses and that of their elderly parents. Instead, Aquino recommended a reckless and unsuitable strategy and dangerously concentrated the couple’s portfolio in high risk Puerto Rico bonds and Puerto Rico Closed End Funds (CEFs) that was heavily concentrated in Puerto Rico debt and are inherently risky investments with significant use of leverage. Additionally, the client alleges that Aquino executed transactions without their content. Aquino represented to the couple that these investments were safe and liquid investments that would generate income and preserve their principal, and Aquino continued to reassure the couple that there was nothing to worry about, even as their investments declined in value. It is even alleged that Aquino recommended the couple continue to investment in high risk Puerto Rico bonds after they began plummeting in value. Additionally, according to the claim filed with FINRA Dispute Resolution, Aquino recommended the couple establish a line of credit to pay off a loan balance that Aquino previously recommended; this unsuitable and unnecessary loan strategy only exacerbated the clients’ losses. The CEFs in particular are completely illiquid and cannot be sold as their is no market for them. Aquino failed to disclose the extraordinary risks associated with the reckless investment strategy he recommended, and in the end, the couple lost $5.1 million of their irreplaceable principal, and interest payments and fund distributions that the couple relied upon have virtually ceased.
Regrettably, the above case is not an isolated incident. Erez Law and co-counsel Aldarondo & Lopez Bras also recently filed a FINRA arbitration on behalf of a former customers of Aquino, an elderly couple who entrusted Aquino with their irreplaceable life savings. Similar to the couple above, according to the claim filed with FINRA Dispute Resolution, these clients were not interested in high risk investments and wanted to preserve their principal and generate a modest degree of income to pay for their mother’s living expenses and children’s education and living expenses. And just like the couple above, Aquino allegedly recommended a reckless and unsuitable strategy of dangerously concentrating their portfolio in high risk Puerto Rico bonds and Puerto Rico focused CEFs. Morgan Stanley and Aquino caused the couple staggering losses of $3.1 million, and the interest payments and fund distributions that the couple relied upon have virtually ceased as well.
It is alleged that Angel Aquino recommended that his customers invest in the following bonds:
- Commonwealth of Puerto Rico Public Improvement Bonds (GO)
- Government Development Bank for Puerto Rico (GDB)
- First Subordinate Series 2010C
- Puerto Rico AAA Portfolio Bond Fund
- Puerto Rico Public Finance Corporation (PFC)
- Puerto Rico Aqueduct and Sewer Authority (PRASA)
- Puerto Rico Electric Power Authority (PREPA)
- Puerto Rico Employees Retirement System (ERS)
- Puerto Rico Fixed Income Fund
- Puerto Rico Fixed Income Fund II
- Puerto Rico Fixed Income Fund III
- Puerto Rico Fixed Income Fund IV
- Puerto Rico Highways & Transportation Authority (PRHTA)
- Puerto Rico Housing Finance Authority (PRHFA)
- Puerto Rico Industrial Development Company (PRIDCO)
- Puerto Rico Infrastructure Financing Authority (PRIFA)
- Puerto Rico Investors Tax Free Fund
- Puerto Rico Investors Tax Free Fund III
- Puerto Rico Investors Tax Free Fund IV
- Puerto Rico Public Buildings Authority (PBA)
- Puerto Rico Sales Tax Financing Corporation (COFINA)
- Tax Free Puerto Rico Fund
- Tax Free Puerto Rico Fund II
- Tax Free Puerto Rico Target Maturity Fund
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.
Aquino has also been the subject of five new customer complaints, according to his CRD report:
- July 2017. “Claimants alleged, inter alia, unsuitability with respect to municipal bond and closed-end fund investments – 2010 to 2017.” This case is currently pending.
- July 2017. “Claimants alleged, inter alia, unsuitability with respect to municipal bond and closed-end fund investments – 2010 to 2017.” This case is currently pending.
- July 2014. “Claimants alleged, inter alia, unsuitability with respect to Puerto Rico municipal bond investments -2013 to 2017.” This case is currently pending.
- May 2017. “Claimants alleged, inter alia, misrepresentation with respect to purchase of municipal bonds in accounts – 2013 to 2014.” The customer is seeking $365,000 in damages and the case is currently pending.
- May 2017. “Claimants alleged, inter alia, unsuitability with respect to purchase of municipal bonds in accounts – 2013 to 2017.” The customer is seeking $594,000 in damages and the case is currently pending.
Back in February 2017, we previously reported on these customer complaints:
- December 2016. “Claimants alleged, inter alia, unsuitability with respect to municipal bond investments – 2012 to 2015.” The customer seeks damages of $6 million.
- July 2016. “Claimants alleged, inter alia, unsuitability with respect to the Puerto Rico closed-end fund investment – 2012 to 2013.” The case is pending.
- November 2015. “Claimant alleges unsuitable overconcentration and misrepresentations concerning closed-end funds.” The customer sought $300,000, but the case was withdrawn.
- June 2014. “The customers allege unsuitable investment recommendations and misrepresentations and omission of material facts from March 2007 to September 2009.” The claim was settled for $363,000.
- April 2014. “Claimants allege, inter alia, misrepresentation with respect to the purchases of Puerto Rico Municipal Bonds in their accounts.” The claim was settled for $65,000.
- July 2001. “Clients, through their attorney, allege transactions were made in their account without their authorization.” The customer sought $33,905-$35,000, but the case was withdrawn.
A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a firm offers a security to its customers, the firm must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for any customer of the firm. The suitability of an investment for a particular individual is at the center of the investment process and one of the key fiduciary duties owed by a firm and its broker to the customer. A firm may be held liable for its failure to recommend suitable investments to its customers.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Morgan Stanley may be liable for investment or other losses suffered by Aquino’s customers.
Erez Law represents investors in the United States for claims against former Morgan Stanley financial advisor Angel Aquino, who is alleged to dangerously concentrate customers’ investment portfolio in high risk and unsuitable Puerto Rico bonds. If you were a client of Morgan Stanley or another firm, 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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