According to InvestmentNews, New York City Council Speaker Melissa Mark-Viverito is asking the U.S. Securities and Exchange Commission (“SEC”) to conduct a probe into OppenheimerFunds, Inc. (“OPY”) and its impact on Puerto Rico’s financial woes. Speaker Mark-Viverito believes that the asset-management company played a part in making Puerto Rico’s financial crisis worse by investing even more in the island’s debt. She claims that just in the last eight months, OppenheimerFunds has added $500 million to investments it made in Puerto Rican debt.
Right now, the U.S. territory owes over $70 billion in debt, which it is struggling to pay. It recently defaulted on over $370 million of a bond payment that was due this month. Another $2 billion is due in July, including around $700 million in general obligation debt.
To satisfy investor redemptions, OppenheimerFunds has sold its non-Puerto Rico bonds, which would have raised the current allocation of the asset manager’s funds to the Commonwealth. In a letter to the SEC, Mark-Viverito, who was born in Puerto Rico, urged the agency to look into whether Oppenheimer has complied with all regulations and securities laws when handling its Puerto Rican bond investments. She believes banks, hedge funds, and other investors in the territory’s general-obligation bonds and utility debt are to blame for the island’s financial woes.
However, OppenheimerFunds maintains that the company has been helping its investors while also helping Puerto Rico with its infrastructure financing. InvestmentNews reports that according to MorningStar Inc., the total exposure of Oppenheimer Funds to Puerto Rico in mutual funds has gone down over the past two years. In December, OppenheimerFunds was among the hedge funds and mutual funds to consent to a 15% reduction in face value on its Puerto Rico Electric Power Authority debt.
This week, U.S. Treasury Secretary Jacob Lew traveled to Puerto Rico. The territory’s government has been asking Congress to help Puerto Restructure its debt. However, no resolution from Congress has been forthcoming to date.
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New York City Council speaker seeks SEC probe of OppenheimerFunds on Puerto Rico, InvestmentNews, May 6, 2016
Treasury Secretary Lew says time is now to help Puerto Rico, The San Diego Union Tribune, May 10, 2016