(Reuters) - Wall Street watchdog FINRA said Wednesday it is struggling to find enough arbitrators to handle a mounting number of claims from investors who lost money in closed-end Puerto Rico bond funds.
Investors have filed about 165 cases involving Puerto Rico bond funds, but a Financial Industry Regulatory Authority official said that figure could top 500. As it searches for more arbitrators, FINRA has placed a stay on cases with no arbitration panel.
Linda Fienberg, president of FINRA dispute resolution, said she expects the delay to last about two weeks.
Arbitrators who hear cases in Puerto Rico usually come from south Florida. FINRA is speaking to lawyers about possible regions it could draw from, such as Georgia or Texas, to add to its ranks of arbitrators for the cases.
FINRA also is exploring other locations outside of Puerto Rico where arbitrators could hear the cases, Fienberg said. For example, lawyers from South Florida are handling a majority of the cases, which could lead to holding some of the proceedings there, she said.
Meanwhile, the delays are frustrating lawyers, including some with clients who are in poor health.
“I’ve been receiving emails all day today from members getting frustrated that all the cases are stayed,” said Jason Doss, president of the Public Investors Arbitration Bar Association, a group of lawyers that represent investors in securities arbitration cases. “My initial reaction is that there aren’t enough arbitrators to satisfy the needs to investors. FINRA needs to do more to recruit more arbitrators.”
Robert Pearce, a lawyer in Boca Raton, Florida, said an 80-year-old client who recently had his case expedited will now have to wait. He said his client is in failing health.
“I question (Linda Fienberg’s) authority to shut down the entire process,” Pearce said.
FINRA, Wall Street’s industry-funded watchdog, also runs the securities arbitration forum where brokerages and investors must resolve their legal disputes.
Jeffrey Sonn, a lawyer in Fort Lauderdale, Florida whose firm is representing investors in 130 cases, said his clients have claims against UBS Financial Services in Puerto Rico. His clients, in general, accuse the firm of inappropriately putting their money in closed-end Puerto Rico bond funds.
Other U.S. broker-dealers have offered the closed-end funds to investors. Claims have been made against Santander Securities, Popular Securities, Oriental Financial Services and Merrill Lynch, Pearce said.
Additional reporting by Tim McLaughlin in Boston; Editing by Chizu Nomiyama and Richard Chang