Puerto Rico Could Be Forced Under SEC Jurisdiction

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man

What happened:

Puerto Rico has long been a safe haven for businesses and investors weary of the Securities and Exchange Commission. Despite the fact that Puerto Rico’s public sector is going through bankruptcy, the private sector has enjoyed relative freedom from the intrusive hands of the U.S. government.

That will change if a bill making its way through Congress becomes law.

Companies formed in Puerto Rico (and other U.S. territories) have always been exempted from the Investment Company Act of 1940 if they only offer investments inside the territory. This means the SEC doesn’t have a say in how investment funds are structured and managed.

But the U.S. Territories Investor Protection Act of 2017 will end the exemption. The act has passed the house and is now being debated in the Senate.

The bill will give the SEC jurisdiction over Puerto Rico and other U.S. territories. The supposed purpose is to prevent companies from making risky investments, or defrauding their investors.

What this means:

Initially that might sound like a good thing, to extend protection to investors in Puerto Rico.  But the issue is that the SEC doesn’t have the best track record, and investors may be specifically looking for markets not under their jurisdiction.

For example, the SEC gave Enron a clean bill of health, failing to discover their cooked books before it was too late to save investors. That type of regulation is worse than none at all, because it gives people a false sense of security. If investors know there is no organization watching out for them, they will do it themselves.

In the end it was James Chanos, a short seller, who did the digging into Enron and found out about the fraud. So an entire government agency missed what a single investor discovered. And we trust the SEC to protect investors?

If this bill passes, it means more companies brought under the umbrella of the SEC, limiting choice, and taking power away from the individuals involved. Many of those investors are perfectly capable of doing their own research--and may see a benefit in going with riskier or unique investments.

Alternatively, it also means that various hedge funds who have focused on Puerto Rico as an SEC-exempt territory, and opened domestic offices, will no longer find special exclusion rights and could depart, taking away significant sources of capital away with them. 

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Ignatius's picture

Getting a handle on unregulated silver trading?

It's just a guess...

Evander's picture

This certainly has nothing to do with protecting the people. It's a power move, and it gives more access to finanical safe havens for future tax revenue.  The U.S. needs more tax revenue because they are always adding more debt.  More debt means more taxes.

Cognitive Dissonance's picture

Is this the same PR headed for bankruptcy?

GunnerySgtHartman's picture

One and the same (although it is already in bankruptcy).

Is it too late to give PR back to Spain???

mjcarr51's picture

Not if scumbucket Luis Gutierrez has anything to do with the decision.

1904AUSTIN's picture

This island is an anchor....always has been.....always will be.  Cut the cord!

The central planners's picture

The island has been the anchor or the FED is the anchor? PR produced tons of sugar and had plenty of other factories like oil refineries but they were forced out of bussiness to make the island dependent on debt.

Duc888's picture

 

 

IRS is registered as a corporation in PR, just sayin'....

Arrow4Truth's picture

You've seen that too. Got the DUNS number?

Tunga's picture

Some folks think a "Tax Court" is a lawful type of thing, but no.

TITLE 28—JUDICIARY AND JUDICIAL PROCEDURE

TITLE 28 > PART VI > CHAPTER 176 > SUBCHAPTER A > § 3002

§ 3002. Definitions

(2) “Court” means any court created by the Congress of the United States, excluding the United States Tax Court.

According to the code;

http://codes.lp.findlaw.com/uscode/28/VI/176/A/3002

Arrow4Truth's picture

Yep. Seen it all before. I'm not a taxpayer.

Tunga's picture

http://www.law.cornell.edu/uscode/html/uscode31/usc_sec_31_00001321----0...
US Code - Section 1321: Trust funds
(a) The following are classified as trust funds:
(62) Puerto Rico special fund (Internal Revenue)

Tunga's picture

And the Secretary of the Treasury of Puerto Rico has the power to collect internal revenue.

small axe's picture

no need to send the gunboats to collect the debt anymore, the SEC is on it...

https://theintercept.com/2017/05/09/puerto-ricos-123-billion-bankruptcy-...

847328_3527's picture

 

"Gringos go home!

~ Juan Valdez

spanish inquisition's picture

Much like US citizens, anyone who was a resident of PR is now liable for the debt no matter where they live.

847328_3527's picture

Where did that $123 BILLION go?

 

Bankers, CEOs, gubmint officials, politicians, etc got RICH, dividing the $123 Billion uin spoilds (bad loans, etc), while the debt gets socialized and forced onto the dumbed-down taxpayers.

 

"Yes we can!"

Sizzurp's picture

I have a better idea. Cut Puerto Rico loose as a "US territory" and let them manage their own affairs as they see fit.

A. Boaty's picture

Viva Puerto Rico Libre!

VWAndy's picture

 Cuz more corruption always works out so well.

Arrow4Truth's picture

Maybe PR will be the new Venezuela. Oh wait, it's a U$ territory.

Stormtrooper's picture

PR will be the next Shitcago.

moorewasthebestbond's picture

Protecting investors... and other fairy tales.

Cordeezy's picture

What if they secede ? Then who forces them to pay?

www.escapeamazon.com

FinsterF's picture

What if investors take losses?

Or have they been outlawed?

wet_nurse's picture

It's great that the fine institution that is the US Senate is looking after the interests of the American people.

shovelhead's picture

Why are HY bonds high yield?

Uh...lemmee think...

Hmmm... I'm stumped. I was going to say risk but there's no such thing as risk in Govt. bonds.

To Hell In A Handbasket's picture

I'm beyond caring. Puerto Rico does have its fiscal issues and overspends, just like mainland USSA, so for all you USSA cheer-leading hypocrites, I'd have a bit of humility. The saying stones and glass houses, springs to mind. The banking parasites are gutting Puerto Rico as we speak. Puerto Rico as been at the forefront of Chicago economics. Sell off the assets, land and tourism industry to outside stakeholders. Surprise, surprise the wealth is sucked out of the country/economy and not recycled. 

Lucky Leprachaun's picture

True, but the people and their 'leaders' there spent like drunks in a whorehouse while they were able to borrow.

Archive_file's picture

Otherwise known as Neolibetalism.

"...Chicago economics. Sell off the assets, land and tourism industry to outside stakeholders. Surprise, surprise the wealth is sucked out of the country/economy and not recycled."

Coming to America now.

chosen's picture

Get rid of Puerto Rico.  They had an independence movement some years back.  Let them be their own country.  Congress should pass a bill simply stating that Puerto Rico is no longer a territory of the United States.   We don't need to be supporting more worthless spics.

847328_3527's picture

PR should build a Wall, and make Americans pay for it!

wombats's picture

They already have their 'wall'.  It's the Caribbean Sea.

Yen Cross's picture

lol!!!  Moar shit to shovel under the rug. Let China run Peurto Wreck-O-.

silverer's picture

Looks like the banks scored big. They now own the place. Backdoor payoffs and deals will pile up. The victims are always the same: the mass produced sheeple get fleeced.

Taras Bulba's picture

The good news is help is on the way-not:

Banksters have put one of their star players in charge:

https://sputniknews.com/politics/201705061053346622-jaresko-puerto-rico-...

 

Robert Parry at Consortium.com has written some excellent articles on the scams this woman has orchestrated-she is connected very well with the banksters!

 

(search his archives or google search)

also, zerohedge search provides articles:

 

sam site's picture

Harry Markapolos in his Madoff expose "No one would listen" showed how SEC regulators had an incentive to look the other way because they wanted in on the big money seeking employment on Wall St, later when they left government service.

You're right about how you're better protected if you don't rely on a regulator having your back.  In the next financial meltdown, many are going to learn about corrupt inattentive government regulators the hard way.