Thank You Mr. Speaker. Today I rise in support of the U.S. Territories Investor Protection Acts, and thank you my friend, French Hill, for having me here. I am a co-sponsor of this bill, and I thank representative Velasquez for introducing HR 1366 and the members who have joined in supporting this important legislation. The US Territories Investor Protection Act will close a loophole in the current law. By passing this bill, Congress will bring to Puerto Rico's investors the same protections enjoyed by investors residing in the 50 states.
Under current law, investment funds that are located and organized in the US territories and sell to only residents of the territories are exempted from the Investment Company Act of 1940 which governs entities such as mutual and exchange rates on funds. Because of these exemptions, investment companies located in the US territories can sell their products to territory residents while not being subjected to the other side, disclosure, and conflict of interest requirements that govern investment companies located in the States. As a result, investors residing in Puerto Rico and the other territories have experienced investment losses, some of which likely, will have been prohibited had the 1948 apply to the territories.
For example, UBS operating in Puerto Rico serve as an advisor to Puerto Rico's Employees Retirement System and in 2008 lead the underwriting of a 2.9 billion dollar bond issue for the government pension agency. UBS then placed 1.7 billion dollar of those funds into UBS managed mutual funds that UBS then sold exclusively to customers in the island. This investment will have been forbidden by the Investment Company Act if this fund were sold in the state.
The Puerto Ricans investors holding these bonds have suffered massive losses and are claiming that the UBS did not properly disclose the risk of these funds. On the island, hundreds of these customers have filed arbitration claims with the Financial Industry Regulatory Authority, and they seek more than 1.1 billion in damages. UBS continues to lose these cases for failing its fiduciary responsibilities. Today’s vote on HR 1366 will help end such outrageous investment abuse and give Congress another opportunity to align the laws governing Puerto Rico and the other territories with the laws governing the 50 states
HR 1366 will remove the territories exemption and make 1940 Investment Company Act apply to companies that are located, organizing, and sell to residents of all territories. I urge my colleagues to vote in support of HR 1366 the US Territories Investors Protection Act. Thank you, and I yield back the remainder of my time.