While structured products have become increasingly popular over the last few years, structured products are still poorly understood by investors and investment professionals alike. At best, structured products are complicated and not appropriate for every investor. At worst, structured products are used to drive up broker commissions instead of increasing—or even maintaining—an investor's wealth. The best way to avoid losing substantial amounts of money in structured product investments is to understand how to protect yourself.
Structured Product Fraud & Investment Misconduct
FINRA has issued a few warnings regarding structured products, which include investment instruments such as reverse convertibles, principal-protected notes, and index-linked CDs. Unfortunately, structured products can be so complex that investors—and even some financial professionals—fail to understand how they work. And, when there is that much confusion surrounding an investment, the environment becomes ripe for investment misconduct and fraud.
Although structured products can be very complex, the investor complaints related to these investment products can ultimately be boiled down into two basic concerns:
- The structured product is not suitable for your financial situation and goals.
- The risks of the structured product were not fully explained to you.
What If My Broker Is Trying to Pressure Me?
Your broker has a professional duty to make sure you understand the risks and issues associated with an investment, and you should also be doing your own research into any new investment product that you’re considering. If, despite your questions and research, you don’t understand the product or feel uncomfortable with some aspect of it, then it’s probably a wise decision to move on—and your financial professional should recognize that choice.
It’s important to keep in mind that no legitimate financial professional should ever pressure you into investing in a particular product. If you feel pressured, harassed, or otherwise manipulated by your broker, it’s probably time to start looking for a new financial professional. Your broker should be willing to get to know you, address your hesitations, and make recommendations that you feel comfortable with.
What Do I Need to Watch for If I Have Not Yet Purchased?
Here's what you need to know if you have not already purchased a structured product:
- They contain risky derivatives and have no income guarantee.
- They are hard to understand—for both investors and brokers.
- They are high in fees and profitable for banks and brokers.
- They are frequently sold to seniors and people who can't afford major losses.
- They are not safe and secure investments.
- They are not guaranteed and should generally not be used if you need the money to pay expenses, need the money quickly, or if you cannot afford a loss of principal.
- They are sold by large firms with trusted names
How Can I Protect Myself If I Already Have a Structured Product?
If you have lost money, it is important to contact our attorneys as soon as possible. Your lawyer will investigate the broker's actions and the supervision provided by the brokerage house or bank. Many brokers do not understand structured products and cannot adequately advise investors about the risks; however, many brokerage houses allow this to happen.
If you have lost money, you are not alone and you have nothing to be embarrassed about. Just last year, the SEC and some state securities agencies set up special task forces to monitor structured products. Individual investor structured product claims are on the rise. Since 2008, when FINA began tracking such complains, these have been a top source of investor complaints.
For more information about your potential claim, please contact an experienced lawyer who can advise you regarding your rights to securities arbitration or other potential resolutions.