Yesterday, the U.S. House of Representatives passed a bill (HR 5322) that would close a loophole allowing investment firms in Puerto Rico to circumvent Securities and Exchange Commission (SEC) regulations that apply to the same type of companies in the U.S. mainland. Under the bill, SEC regulations will now apply to so-called “local mutual funds.” The bill, championed by Puerto Rican Congresswoman Nydia Velázquez (D-NY) was motivated by reports of alleged conflicts of interest after UBS used its own funds to buy part of a $2.9 billion Puerto Rico bond transaction that was issued between 2007 and 2008. UBS served as an advisor to the government on this bond issuance, a practice allowed by the loophole since 1940. The legislation was approved in the lower chamber by voice vote and now goes to the Senate for consideration.
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