Velázquez said that an anonymous senator put a hold on the bill at the end of that year. So she reintroduced her bill on March 6 of this year with eight bipartisan co-sponsors, including Rep. Sean Duffy (R-Wis.), Rep. Jose Serrano (D-N.Y.), and the sole congressional representative for Puerto Rico, Rep. Jenniffer González-Colón, a Republican.
González-Colón spoke about the bill over the spring on the House floor, saying that "investors residing in Puerto Rico and other territories have experienced investment losses, some of which likely would have been prohibited had the 1940 Act applied to the territories."
González-Colón notes that UBS was able to serve as an adviser to the Puerto Rico's pension agency, the Employee Retirement System (ERS) and then, in 2008, also led the underwriting of $2.9 billion bond issuances for ERS. UBS Puerto Rico then sold approximately $1.7 billion of those bonds directly into funds managed or co-managed by the firm and sold exclusively to customers on the island. ERS's bonds are currently undergoing bankruptcy-like proceedings.
Publicly filed documents reveal substantial lobbying efforts related to the Investment Company Act of 1940. Luis Fortuño, who served as governor of Puerto Rico from 2009 to 2013, was hired as a lobbyist for "advocacy work in relation to proposed amendments to the Investment Company Act of 1940 and related matters," lobbying disclosure documents show.
Fortuño, who is a partner in Steptoe & Johnson's Washington office, along with his colleagues, have been paid $485,000 for lobbying services related to the Investment Company Act of 1940 since being hired in July 2016, according to quarterly disclosure statements.
Lopez Sanchez & Pirillo LLC, a San Juan-based law firm, is listed as the client who hired Steptoe & Johnson in 2016 and 2017.
That same firm has previously represented UBS Puerto Rico in a 2016 lawsuit, a court filing shows. José Sánchez-Castro, a co-founding member of Lopez Sanchez & Pirillo, has represented UBS Financial Services, UBS Puerto Rico Family of Funds, and the Government Development Bank for Puerto Rico under the "representative cases/matters" portion of his bio page on his firm's website.
Neither Sánchez-Castro nor a representative for UBS responded to multiple requests for comment.
"Our client is a group of Funds. UBS Puerto Rico-sponsored funds are members of that group ," Kathy King, a spokesperson for Steptoe & Johnson, said in a statement to CNBC. "Steptoe represents a group of mutual funds that represent more than 95 percent of the mutual funds of Puerto Rico. These funds all have local independent boards of directors with a fiduciary duty to their specific fund's Puerto Rican shareholders."
"We support the bill and want to protect Puerto Rico investors, but the potential consequences of approving the bill without an amendment to the safe harbor provisions could further harm the local Puerto Rican investors that the bill purports to protect," Steptoe & Johnson's King said in the statement. "We have consistently offered to work with Rep. [Velázquez's] staff to assist in the approval of the bill in a way that will not harm the local investors in hopes to protect."
Fortuño also has his own ties to UBS. The firm is listed as Fortuño's third biggest contributor to his campaign to be governor in 2008, according to election-contributions database, OpenSecrets.org. The site notes that for the contributor category, the organizations themselves have not donated, rather the money calculated in the total is from the organizations' PACs, their individual members or employees or owners, and those individuals' immediate families.
Velázquez's bill has passed the House Financial Services Committee by a unanimous 58 to 0 vote and was passed, in a voice vote, by the full House in May. It was received by the Senate the next day.
The Senate read the legislation twice and then referred it to the Committee on Banking, Housing and Urban Affairs on May 3. That was the last public action taken on the bill.
If Rep. Jeb Hensarling does agree to convene a hearing, it would be the first related to the recent issue of financial sales practices in Puerto Rico.
"If enacted, this legislation would provide fundamental protections for the mutual fund investors living in Puerto Rico and the other U.S. territories," Velázquez wrote in the letter. "Such oversight is critically necessary."