Oversight Board Supports Extension of Disclosure Requirements

SAN JUAN — The Financial Oversight and Management Board (FOMB) for Puerto Rico said it supports the legislative proposal in the U.S. Congress to extend the disclosure requirements of the Federal Rules of Bankruptcy Procedure to professionals employed by the panel’s office, official committees and debtors.

Oversight Board member Arthur J. González supported the proposal, but also voiced concerns during his testimony before the Senate Committee on Energy and Natural Resources regarding Senate Bill 375 and its companion measure, House Bill 1192, or the Puerto Rico Recovery Accuracy in Disclosure Act.

“Extending the disclosure requirements of the Federal Rules of Bankruptcy Procedure to professional persons seeking compensation under Promesa [Puerto Rico Oversight, Management, and Economic Stability Act] will help to avoid conflicts of interest and provide greater transparency through enhanced disclosure,” said González, who is a former chief judge of the U.S. Bankruptcy Court for the Southern District of New York.

González testified that a technical application of the term “creditor” would render compliance with the statute practically impossible and extraordinarily costly, given that more than 165,000 creditors filed a proof of a claim under Promesa’s Title III. The bill currently requires disclosures of each professional’s connections with all creditors.

“The burden of complying with such a requirement would most likely make it impossible for smaller professional firms that do not have the staff to undertake such a massive cross-checking effort to participate in the Promesa case,” González said.

“Limiting the cross-checking to creditors above a certain amount would greatly reduce the burden and be consistent with established practice in the disclosure process in bankruptcy cases of the size and breadth of the Title III cases,” he added.

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