(Adds comment from lawyer, details on FINRA note; updates number of arbitrators)
By Ashley Lau
NEW YORK, April 14 (Reuters) - Wall Street watchdog FINRA said on Monday it is lifting the hold it had put on some cases involving investors who lost money in closed-end Puerto Rico bond funds after expanding its pool of arbitrators available to hear the cases.
The Financial Industry Regulatory Authority said on Monday there are currently about 700 eligible arbitrators on its roster who have agreed to serve in Puerto Rico, where FINRA expects the majority of the roughly 209 cases it has received as of April 7 to be heard.
"We are really confident that we will have enough arbitrators to handle all the cases that go to hearing," said Linda Fienberg, president of FINRA dispute resolution, in an interview Monday. Fienberg said a letter was sent out on Monday to all parties involved in the cases informing them the hearings will move forward.
Last month, FINRA placed a hold on cases with no arbitration panel after struggling to find sufficient arbitrators to handle the mounting number of cases it had received. At that time, the pool of arbitrators was around 60.
Since then, the self regulatory authority has been actively seeking arbitrators able to serve on the cases and recruiting in Puerto Rico, where only a small fraction of the roughly 700 arbitrators currently reside.
"We're continuing our campaign to find additional arbitrators," Fienberg said. "We will have staff in Puerto Rico this month talking with a series of professional groups who have expressed an interest" in serving as an arbitrator.
The flood of cases follows a sharp decline in the value of Puerto Rico municipal bonds last year that resulted in big losses for investors in closed-end funds with heavy exposure to those bonds. Lawyers for investors have accused UBS Financial Services, Merrill Lynch and other brokerages of inappropriately putting clients' money into such funds.
FINRA said in a note published on its website on Monday it would not be modifying its existing venue rule, which states arbitration hearings will be held at a location closest to where the investor resides, without the agreement of both parties to change the hearing venue.
The decision follows a push from some claimants' lawyers earlier this month to allow the cases to be heard in the southeast region of the United States, in addition to Puerto Rico, to work around the issue of having to send U.S.-based arbitrators to Puerto Rico. UBS had objected to the proposal.
"Most arbitrators have other jobs and other commitments," said Andrew Stoltmann, a Chicago-based lawyer who represents investors, noting that the need to relocate arbitrators could lead to delays.
Stoltmann, who represents about 25 of the investors involved in the cases, estimates there will be some 750 cases filed over the next six months and potentially double that amount over the next 12 to 18 months.
The vast majority of the arbitrators in FINRA's pool are currently based outside of Puerto Rico in the southeast region of the United States, including Georgia, Florida, Alabama, Mississippi and Louisiana, as well as Texas. FINRA said it plans to pay for those arbitrators' travel expenses to serve in San Juan.
Because Spanish is the primary language in Puerto Rico, FINRA said UBS and Merrill Lynch have agreed to pay for translation services in which either is involved.
FINRA, which had requested the services, said it is also seeking agreement from other brokerages involved in the cases. (Reporting by Ashley Lau in New York; Editing by Chizu Nomiyama and Meredith Mazzilli)