Recovery Options For Investors Who Own Frontier Communications Corporate Bonds

The Wolper Law Firm, P.A. is currently investigating claims against FMS Bonds and other broker-dealers that recommended that customers concentrate their accounts in bonds issued by Frontier Communications, which filed for Chapter 11 bankruptcy protection in April 2020. Frontier Communications is a telecommunications company that provides telephone service, TV and internet service to customers in more than 20 states.

Frontier Communications is saddled with billions in debt due to mismanagement and bad business deals, which prompted the company to file for bankruptcy protection in April 2020. According to bankruptcy filings, Frontier Communications is seeking to restructure approximately $17.5 billion in debt. In order to do so, bondholders will be required to accept a steep discount on the principal value of their bonds or risk losing the entirety of their investment. In September 2020, Frontier Communications sought approval of a plan to emerge from bankruptcy through a financing plan. The impact to bondholders has yet to be clearly defined.

FMS Bonds is one of the primary broker-dealers that pedaled Frontier Communications Bonds to retail customer because of the high coupon without first explaining the credit risk associated with the bonds. Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

Prior to recommending Frontier Communications bonds, FMS Bonds had a regulatory obligation to conduct due diligence on Frontier Communications and understand the credit risk of the company. Moreover, FMS Bonds had an obligation to fully disclose those risks to customers and ensure that they appreciated those risks. Absent full disclose, customers who invested in Frontier Communications bonds may have recourse against FMS Bonds to recover investment losses.

Failure to disclose the characteristics and risks of a bond may also constitute bond fraud. Federal and state securities laws protect customers who are victims of material misrepresentations or omissions, which constitute bond fraud.

In 2017, FMS Bonds entered into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA, consenting to sanctions. According to the AWC, “it effected 170 customer transactions in a municipal security in an amount lower than the minimum denomination of the issue which were were not subject to an exception under the rule. The findings stated that [FMSBonds Inc.] failed to disclose all material facts concerning 51 municipal securities transactions at or prior to the time of trade…Specifically, the firm failed to inform its customer that the municipal securities transaction was in an amount below the minimum denomination of the issue, or that The municipal securities contained a resale restriction would could affect the liquidity of the customer’s position.”

If you invested in Frontier Communications Bonds, and your brokerage firm and/or Financial Advisor failed to disclose the risks of these bonds prior to the recommendation, you may have a basis to recover your investment losses. The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at mwolper@wolperlawfirm.com.