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Unsuitable Broker Recommendations of Structured Notes, Including Callable Yield Notes and Autocallable Securities May Be Causing Investors’ Losses During COVID-19

Structured Notes See Steep Decline During Coronavirus Market Crisis

Just weeks into the financial crisis wrought by the novel Coronavirus (COVID-19), many investors are struggling to deal with the volatile impact of this pandemic not just on the markets but also on their portfolios. 

But what many of them don’t know is that some of these losses might not have been as severe if only their brokers had refrained from making investment recommendations that were unsuitable for them or, at the very least, had properly apprised them of the risks involved. 

Structured notes are one type of investment of concern, especially as many of them have undergone significant declines following the recent market crash. Shepherd Smith Edwards and Kantas (SSEK Law Firm) is investigating claims by investors whose brokers many have inappropriately recommended that they get into these investments, including callable yield notes, auto-callable securities and others. 

Even as we implement the necessary health, safety and social distancing measures needed to keep employees and clients safe, our broker fraud lawyers remain hard at work helping investors throughout the United States. Contact SSEK Law Firm today. 

What Are These Complex Investments?

These complex investments are high risk and not for the average investor. They are usually illiquid and don’t trade on an exchange. Brokerage firms are the ones that usually issue them. These investments are most certainly not for investors who can’t handle too much risk, including your typical retiree or senior investor, nor are they suitable for most unsophisticated retail investors. 

Hybrid security, structured notes are derivatives and not direct investments and they can be based on one or more indices or securities, a debt issuance, a foreign currency, or a commodity. The majority of these notes pay a coupon or interest rate according to set parameters with the payment defined upon maturity. 

In the years following the 2009 housing crisis and leading up to the COVID-19 market crash, here is a list of a few of the bigger firms whose stockbrokers have recommended and sold these types of complex investments to investors:

  • Barclays (BARC)
  • UBS
  • JP Morgan
  • Bank of America Merill Lynch
  • Morgan Stanley

Aside from auto-callable securities and callable yield notes, other types of structured notes include:

  • Market linked notes
  • Trigger performance securities
  • Return optimization notes
  • E-TRACs
  • Strategic return notes
  • Return optimization notes
  • Capped leveraged return notes
  • Equity Linked Securities (ELKs)
  • Performance Leveraged Upside Securities (PLUS)
  • Target term securities 

Unfortunately, the lure of higher commissions have in recent years provided added incentives to stockbrokers to recommend structured notes to investors, including those for whom they were inappropriate, too risky, or never in alignment with their investment goals to begin with. 

Their brokerage firms, meanwhile, failed in their obligation to properly supervise said brokers to prevent the unsuitable sales and now, with structured notes plunging in value from the effects of COVID-19, it’s investors who are suffering. 

Structured Note Fraud Attorneys

Now, more than ever, investors throughout the United States cannot afford unnecessary losses, especially if they were caused by broker fraud or broker-dealer negligence. For the last 30 years, and during every crisis to hit the markets and the economy during that time, our stockbroker fraud lawyers at SSEK Law Firm have been here for investors. 

We are here for you still. Contact us online or call us at 800-259-9010. We’ve collectively recovered many millions of dollars for thousands of investors throughout the US.

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