{"id":890,"date":"2011-05-30T14:17:01","date_gmt":"2011-05-30T14:17:01","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2011\/05\/sec_and_finra_alerts_retail_in"},"modified":"2022-03-09T16:06:13","modified_gmt":"2022-03-09T22:06:13","slug":"sec-and-finra-alerts-retail-in","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/sec-and-finra-alerts-retail-in\/","title":{"rendered":"SEC and FINRA Alerts Retail Investors About Structured Notes with Principal Protection"},"content":{"rendered":"

\t\t\t\tFINRA and the SEC’s Office of Investor Education and Advocacy has put out an alert called Structured Notes with Principal Protection: Note the Terms of Your Investment<\/em>. The purpose of the alert is to let investors know about the risks involved in investing in this type of note while providing information that will allow them to better understand how the notes work. <\/p>\n

These notes usually put together zero-coupon bond that doesn’t pay interest until maturity with a derivative product that has a payoff tied to an underlying asset, benchmark, or index that may consist of commodities, currencies, and spreads between interest rates. The investor can take part in a return tied to a specific change in the underlying asset’s value. That said, investors should be aware that the way these notes may be structured could cap or limit their upside exposure to the underlying asset, benchmark, or index.<\/p>\n

Investors with structured notes with principal protection that hold them until they mature will usually get a return of at least part of their investment even if there is a decline in the underlying benchmark, index, or asset. However, protection levels aren’t all the same. Some products are guaranteed just 10%, and all guarantees are dependent on the company that made it and its financial strength. <\/p>\n

The SEC and FINRA want investors to know that structured notes with principal protection can have complex pay-out structures, which can make it hard to accurately determine their potential for growth and their risk. Investors should also know that their principal could get tied up for up to 10 years and they may end up not making a profit on their initial investment.<\/p>\n

The Alert recommends asking a number of questions before investing in a structured note with a principal protection:<\/em>
\n\u2022\tIs this product appropriate considering your investment objectives?<\/p>\n

\u2022\tWhat are the risks involved?
\n\u2022
\n\u2022\tWhat type of principal protection is offered?<\/p>\n

\u2022\tWhat are the conditions of the protection?<\/p>\n

\u2022\tAre there additional costs?<\/p>\n

\u2022\tHow long is your money going to be tied up?<\/p>\n

\u2022\tAre you allowed to liquidate or sell prior to the maturity date?<\/p>\n

\u2022\tIs a call feature provided?<\/p>\n

\u2022\tAre there limits to possible gains?<\/p>\n

\u2022\tAre there tax implications?<\/p>\n

\u2022\tHow does the pay-out structure work?<\/p>\n

\u2022\tWhat are your other investment options? <\/p>\n

Usually, investors with structured notes with principal protection that hold them until they mature will usually get a return of at least part of their investment even if there is a decline in the underlying benchmark, index, or asset. However, protection levels aren’t all the same. Some products are guaranteed just 10%, and all guarantees are dependent on the company that makes it and its financial strength. <\/p>\n

The SEC and FINRA want investors to know that structured notes with principal protection can have complex pay-out structures, which can make it hard to accurately determine their potential for growth and their risk. Investors should also know that their principal could get tied up for up to 10 years and they may end up not making a profit on their initial investment.<\/p>\n

Related Web Resources: <\/strong>
\nSEC, FINRA Warn Retail Investors About Investing in Structured Notes with Principal Protection<\/a>, SEC, June 2, 2011
\nStructured Notes with Principal Protection: Note the Terms of Your Investment<\/a><\/em><\/p>\n


\nMore Blog Posts:<\/strong>
\nWall Street Targeting Older Investors With Structured Product Sales, Reports AARP<\/a>, Stockbroker Fraud Blog, March 11, 2011
\nIncrease of Structured Notes with Derivatives Sales Seduces Retirees, Reports <\/a>Bloomberg, Stockbroker Fraud Blog, September 25, 2010
\nMoody’s, Fitch, and Standard and Poor’s Were Exercising Their 1st Amendment Rights When They Gave Inaccurate Subprime Ratings to SIVs, Says, Institutional Investors Securities Blog, December 30, 2010 Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

FINRA and the SEC’s Office of Investor Education and Advocacy has put out an alert called Structured Notes with Principal Protection: Note the Terms of Your Investment. 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