When the federal government set out to regulate mutual funds, investment firms in Puerto Rico were deemed too far off the beaten track to merit scrutiny so the mutual funds were excluded from regulation under the Investment Company Act of 1940, The New York Times reported today. Now, Puerto Rico’s economy is teetering, investors in its bonds have suffered big losses and at least one member of Congress says the 75-year-old exclusion has outlasted its shelf life. Nydia Velázquez (D-N.Y.) is expected to introduce an amendment to the act that would give mutual fund investors in Puerto Rico the same regulatory protection that their counterparts have on the U.S. mainland. The bill, if it becomes law, will not replace the money the investors have lost, but it will bar some of the activities that led to their losses — activities that are already illegal on the mainland.
