Alex Williams (CRD# 2646185), a broker and investment adviser based in New York, has received a pending customer complaint. According...Read More
Structured products or structured notes are complex investment products that are often “structured” to combine the attributes of two or more securities into a single security. The performance of structured products is typically “linked” to the returns of indices, individual stocks, commodities, currencies, or other asset classes.
Structured notes are typically issued by banks and other financial institutions, and sold by financial advisors and investment advisors. They are usually “structured” to combine a promissory note, bond or Certificate of Deposit from the issuer and derivatives on the “linked” security.
Common types of structured notes include reverse convertible notes and enhanced participation notes. Oftentimes, the promissory note, bond or Certificate of Deposit portion of the investment is used to repay the investor’s principal upon maturity, and instead of paying interest on the loan, the issuer will use that money to purchase derivatives on the linked asset, giving the investor upside or downside gains, depending on the movement of the linked asset. This can be attractive to investors because they typically, at a minimum, receive their principal back at maturity.
Structured products or structured notes can be very complex. Unfortunately, it is very common that the risks of them are not properly explained to the customer. Sometimes this is because the financial advisor does not understand the product either.
Some customers are not warned that the return of principal is contingent on the issuers solvency. This means a customer can lose money if the issuer fails. This was the case when many structured note investors lost money because Lehman Brothers went into bankruptcy. Customers should also beware of financial advisors that regularly sell structured notes prior to maturity and then purchase new structured notes. The financial advisor may be attempting to increase his or her commissions by “flipping” the notes prematurely.
We have successfully represented investors who lost money investing in structured notes. Please contact us for a free and confidential case evaluation if you believe that you have lost money due to investing in structured products or structured notes.