Why Structured Products Aren’t For Everyone

Our San Francisco structured product fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) work with investors throughout the San Francisco Bay Area in helping them to recoup their losses.

Structured products are not for everyone, although investors find them very attractive because they can provide the opportunity to earn the high yield not likely to happen with more traditional types of investments.

Unfortunately, even though these market-linked investments should only be marketed to sophisticated investors that can handle a certain level of risk, brokers lured by the healthy commissions have been recommending them to retail investors, including senior investors and retirees, for years.

What Are Structured Products?

These investments are notes linked to certain assets, such as a derivative, a group of securities, or a stock. They usually replace the typical payment feature, like the final payment on principal or the regular interest payment, with another kind of payoff determined by the performance of at least one of the underlying assets.

While often touted as safe, there are risks involved with this kind of investment, including the possible loss of principal. Not only that, but structured products can be hard even for stockbrokers to understand let alone explain to customers.

They have been the subject of regulatory scrutiny by the Financial Industry Regulatory Authority (FINRA) and the US Securities and Exchange Commission (SEC). They also have high illiquidity and some structured notes may not be redeemable before their maturity date.

Losses from structured products, especially when unsuitable for an investor from the get-go, can be massive and brokers and their broker-dealers know this. These investments have been named in many investor claims over the year with various grounds alleged, including unsuitable investments, misrepresentations and omissions, churning, failure to supervise the broker, breach of fiduciary duty, and negligence.

Examples of Structured Notes:

Income Products
Autocallable Securities
Growth Products
Structured Deposit Plans
Callable Yield Notes

Why Structured Notes Are Not for Every San Francisco Investor?

Investors have been known to lose their retirement or other savings because they were unwisely advised to put their money in structured notes. Especially now, with COVID-19, San Francisco Bay Area residents who invested in structured products are finding themselves with losses they never anticipated–and not just because the markets and the economy have been volatile.

There is no guarantee of income and structured products can be high risk.
They charge high fees that benefit broker-dealers and their brokers.
Many investors who purchase them have portfolios that were never equipped to handle losses involving structured products.
They cannot easily be redeemed, so getting your money out in an emergency can prove impossible or cause you to sustain losses.

Many of the investors who have recently invested in this kind of structured product should never have gotten involved in the first place and they only did so at the urging of their broker.

Another reason for significant structured product losses is that the investment was not properly constructed in the beginning and later failed to provide the income and safety touted in marketing materials and by the brokers and investment advisers recommending them.

San Francisco Structured Product Fraud Law Firm

Whichever of these reasons, you may have grounds for a broker fraud or negligence claim against your financial representative and their firm.

Our San Francisco investment fraud attorneys at SSEK Law Firm have helped thousands of investors to get their money back and we are not afraid to go up against even the biggest broker-dealers on Wall Street on our clients’ behalf. Contact us today for your free, no-obligation case consultation via our online form or by calling (415) 287-0877.