Rep. Nydia Velázquez, D-N.Y., introduced a bill Wednesday to crack down on the hedge funds that she says have contributed to Puerto Rico’s financial crisis. Congress has yet to act on a bill giving Puerto Rico bankruptcy protections.

The bill, H.R. 3921, the Hedge Fund Sunshine Act, amends the Securities Exchange Act of 1934 to require hedge funds to file with the Securities and Exchange Commission when they acquire ownership of 1% of a class of equity securities; the current threshold is 5%. Lowering the threshold would provide the public as well as the SEC with more clarity on a fund’s holdings and financial positions. 

“It has become increasingly clear that hedge funds, which have purchased a sizable part of Puerto Rico’s debt, are exacerbating the crisis and profiting from the island’s misery,” said Velázquez, a member of the House Financial Services Committee, in a statement. “This bill will allow regulators and the public to see exactly what role these funds are playing in Puerto Rico’s financial crisis and in our broader economy.” 

Her bill would also institute a new quarterly reporting requirement for all securities — both debt and equity — in which funds hold a 1% or greater ownership stake, ushering in the first time these funds would publicly report on their larger debt holdings, including derivatives.  

Valzquez noted reports that estimate hedge funds control as much as 50% of the island’s financial obligations.

She notes that through their “outsize role,” many funds have come out against extending bankruptcy protections to the island.

President Barack Obama introduced a roadmap for congressional action on Oct. 21 that would, among other measures, afford the island the same bankruptcy options as all 50 states.

Sen. Richard Blumenthal, D-Conn., introduced in July the Puerto Rico Chapter 9 Uniformity Act, which amends the federal bankruptcy code to treat Puerto Rico as a state under chapter 9. The bill has been referred to the Senate Judiciary Committee.

Obama stated in releasing the roadmap that the pending bill to extend Chapter 9 protection to Puerto Rico’s municipalities is “an important first step,” but that because Puerto Rico’s crisis is escalating, “bankruptcy protection is now needed for the commonwealth [of Puerto Rico] as well.”

Congress, he said, “should authorize a broader legal framework that allows for a comprehensive restructuring of Puerto Rico’s debts. This framework should be reserved exclusively for U.S. territories. As under current law, states would remain ineligible to file for bankruptcy under this or any other bankruptcy regime.”