Here's an opportunity for some grad student looking to measure the efficiency of unregulated financial markets;
On a Friday in late March, representatives of about two dozen investment firms gathered at the New York offices of Barclays...PLC to hear Puerto Rico government officials explain why the island's bonds—recently downgraded to near "junk"—were still a good investment.
The officials told the firms, major holders of Puerto Rico debt, that a controversial pension-overhaul proposal favored by investors would pass the island's legislature. Some investors also got private meetings with island officials that day, and at least one firm at the event sold Puerto Rico bonds. Slides from the meeting were posted online by the following Monday.
Puerto Rico didn't break any laws or regulations in holding the meeting, attorneys say. The event highlighted differences in the rules governing how companies and municipal-securities issuers interact with investors.
Securities laws generally require firms to disclose what they say to investors if the information is both material and nonpublic. These regulations don't apply to municipalities, in part because of concerns about the federal government interfering in state and local affairs.
This exception can give large money managers with access to public officials an edge in the $3.7 trillion municipal-bond market, according to industry executives and investors.The question ought to be, are the taxpayers of Puerto Rico well-served by this, i.e. can the island borrow at lower costs than otherwise?