A large part of securities arbitration disputes concerns fraudulent products which are both assembled and marketed by brokerage firms to their unsuspecting clientele. These fraudulent products are often what are referred to as “structured products”. A structured product, is generally a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuance and/or foreign currencies.¹ The variety of products demonstrates the fact that there is no single, uniform definition of a structured product. Structured investments came to pass as companies needed a way to issue debt more cheaply. Traditionally, one of the ways to do this was to issue a convertible bond, that is, debt that under certain circumstances could be converted to equity. In exchange for the potential for a higher return, investors would accept lower interest rates in the meantime.
Structured products can be great but investors also need to be aware of the risks. For example,in April, UBS Financial Services Inc. agreed to pay $10.7 million in fines and restitution to settle Finra allegations that its advisers misled investors about the “principal protection” feature of structured notes issued by Lehman Brothers Holdings Inc. that it sold a few months before that firm collapsed.
In its complaint, Finra said that some UBS advisers didn’t understand the complexity of the 100% principal-protected notes that Lehman issued and failed to tell investors that they were unsecured obligations.
In settling the case without admitting wrongdoing, UBS said that it was pleased to have the matter resolved and that most structured-product sales had been done properly.
Because of all the different structured products and the promises they make, FINRA came out in July with at statement that warns investors about chasing returns in structured products, high-yield bonds and floating-rate loan funds.²
If you think you have been a victim of structured products by a securities broker or an investment brokerage firm, please give the Anton Legal Group a call to evaluate your case. S. David Anton is a Certified Securities Arbitrator and a seasoned Securities Litigation Attorney that will protect your rights and restore your investment funds.
S. David Anton is a member of Public Investors Arbitration Bar Association (PIABA) the preeminent national wide organization of attorneys who represent brokerage firm customers in disputes with the industry. He is also a Certified Securities Arbitrator with the Financial Industry Regulatory Authority (FINRA), formerly NASD and resolves disputes between investors and stockbrokers, investment advisors and their firms. He has been practicing law since 1985 and representing brokerage firm customers since 1999. He is a Tampa, Florida based attorney who can handle securities arbitrations anywhere in the U.S.