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Shepherd Smith Edwards and Kantas Investigates Investor Loses Involving Steepener Structured Notes

Steepener Investments Not Suitable for All Investors

Throughout the US, our investment fraud lawyers at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) represent investors who sustained losses in Steepener investments after they were not fully apprised of the risks or because these structured notes were never suitable for them, to begin with. 

Steepeners are complex investments and they are not for everyone. Some Steepener structured notes and investments have suffered catastrophic losses. Contact SSEK Law Firm to request your free, no-obligation case consultation.

What Are Steepeners?

A kind of structured product, Steepeners are complex investments that are based on or come from one index or security, a foreign currency, a commodity, a debt issuance, or a basket of indices or securities. 

It is a kind of interest rate swap involving one party letting another party pay a fixed rate in return for a floating rate that comes from the difference between short term and long term rates. 

This kind of structured note makes it possible for investors to bet on the yield curve’s shape. They usually have short-term teaser interest rates, don’t mature for a long time – some for many years. They also have certain traits that make it possible for them to lose capital fast while lowering interest payments. 

It has not been uncommon for investors who’ve later sold their Steepeners to lose money in the process. Also, because leverage is often used to multiply returns, these investments have been known to be leveraged dozens of times, and this, too, can lead to even greater losses. 

Based on its definition alone, which is hard for most retail investors to understand, it is clear that Steepener structured notes should not be for the inexperienced investor, the conservative one, or the investor that cannot handle a lot of risks.  

Yet, there have been many brokerage firms and brokers in the United States who sold these investments to retail clients while failing to explain that they could lose a lot of money. Some investors are even contending that these structured notes were marketed to them as bonds. There are also investors who found their losses magnified because their portfolios had been overconcentrated with Steepeners.

Brokerage Firms Sold Steepeners Even When Unsuitable

Just to name two firms that sold Steepeners to investors, Investors Capital Corp. and Trident Partners were the subjects of separate Financial Industry Regulatory Authority (FINRA) cases a few years back. 

In the FINRA case against Investors Capital, which is a subsidiary of Cetera Financial, the brokerage firm agreed to pay $1.1M to settle the self-regulatory organization’s (SRO’s) charges that it made unsuitable recommendations of Steepeners and other complex investments to clients. 

The Investors Capital broker involved in the allegedly unsuitable sales, Robert Estevez, has been named in several customer disputes. He is now a Joseph Gunnar broker. 

Trident Capital, meanwhile, in 2017 was fined $50K by FINRA for failing to adequately supervise the sale of these investments to firm customers. During the period at issue in the SRO’s case, Steepeners were a huge part of the broker-dealer’s business, making up 10% of its commissions.

Steepener Structured Notes Investor Lawyers

Our Steepener investment fraud attorneys would be happy to help you explore your legal options. Our securities lawyers can walk you through the details involved in various investment claims types including structured notes. 

If you believe that you may have been a victim of omissions, misrepresentation or unsuitably or worked with brokers from Investors Capital and Trident Partners, contact SSEK Law Firm today. We have worked with many investors across the US to help them recoup the losses they suffered from these structured notes.

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