Articles Posted in Structured Products

Robert Wayne Pearce, P.A. is investigating and representing investors nationwide that were sold investments in UBS Financial Services Yield Enhancement Strategy (YES) program.  UBS offered the high-risk YES program to customers whose net worth was at least $5 million.  UBS financial advisers across the United States presented the YES program as a safe way to earn additional income by using existing assets at UBS as collateral.  UBS further represented to its clients that the YES program had “excellent risk metrics” and would allow its clients to increase returns, while reducing risk.  Unfortunately, many UBS brokers failed to adequately understand and/or disclose the risks associated with this high-risk investment program.

It also appears the UBS YES program was mismanaged.  UBS presented its YES program as using a “market neutral” options strategy, which means that it is not a directional wager that the price of the underlying asset will increase or decrease in value. The strategy instead seeks to profit from a relative lack of volatility in the price of the underlying asset.  Contrary to UBS’ presentation of the YES program, we believe the YES managers actively engaged in market timing and took directional positions on the market and suffered significant losses as a result.  We believe the UBS YES program was, in fact, an aggressive options strategy.  Consequently, YES posed a significant risk for investment portfolios, especially those that were over-concentrated in these securities. Continue Reading

Robert Wayne Pearce, P.A. is investigating and representing investors nationwide that were sold steepeners, which are notes or CDs that pay varying levels of interest depending on the steepness or flatness of the yield curve.  When the yield curve flattened in 2018, these steepeners rapidly declined in value and either stopped paying interest or paid much less interest.  In 2019, the yield curve inverted and short term interest rates rose to a higher level than long term interest rates. This yield curve inversion caused even more losses.

The negative impact on investors in the following types of structured products has been significant: Structured CDs, Market-Linked CDs, Leverage Callable CMS Curve Linked Notes, Callable Quarterly CMS Spread-Linked Notes, Callable Variable Rate Range Accrual CDs, Callable Interest Rate Spread CDs, Callable CMS Spread Notes, and Senior Callable CMS Steepener Notes. Continue Reading

Trident Partners Ltd. has submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which it has been censured and fined $50,000 by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the sales and suitability of steepeners, a complex, structured product.

Trident Partners, headquartered in Woodbury, New York, was found by FINRA to have failed to establish, maintain, and enforce a supervisory system to ensure that recommendations for its sale of steepeners were suitable.  Steepeners are complex, structured products that are typically longer-term notes and certificates of deposit with maturities spanning from 10-30 years.  They are typically callable by the issuers after a short, pre-specified time.  They pay higher interest rates, but if the steepener is not called after a year, the rates can drop to as low as zero, earning no returns for the remainder of the term.  FINRA found that during the relevant period, steepeners were a significant part of Trident Partners’ business, with approximately 1,600 transactions and accounting for at least 10% of commissions generated.  Continue Reading

The Financial Industry Regulatory Authority (FINRA) has ordered Wells Fargo Advisors, LLC (Wells Fargo) to pay a $500,000 fine and $241,974.34 plus pre-judgment interest in restitution to customers for allegedly making unsuitable recommendations to customers to purchase structured repackaged asset-backed trust securities (STRATS).

From approximately 2005 to 2012, Wells Fargo made unsuitable STRATS recommendations to its retail customers, selling nearly $12 million worth of the complex structured products. According to FINRA, Wells Fargo failed to properly educate its registered representatives about the risks associated with STRATS and that the customers had the potential to suffer significant losses. FINRA also found that Wells Fargo’s internal-use STRATS brochures were not fair and balanced and neglected to provide an appropriate basis for evaluating the risks and therefore the suitability of the STRATS. Wells Fargo did not admit to or deny FINRA’s findings. Continue Reading

JPMorgan Chase & Co (JPMorgan) is under investigation by the Securities and Exchange Commission (SEC) about a potential conflict of interest and breach of fiduciary duty with respect to its sales of mutual funds and other proprietary products.

According to InvestmentNews, JPMorgan received subpoenas and inquiries from the SEC and other government authorities about the firm’s sale and recommendations of mutual funds and other proprietary investment products in its wealth management business. At question is the alleged breach of fiduciary duty, which requires that financial advisors put their customers’ best interests ahead of their own. Continue Reading

Michael Hadden, a former broker with UBS Wealth Management (UBS), has made claims that UBS allegedly made it “impossible” for his to continue working due to “… its various unethical practices with respect to customers …” as stated in his original arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Mr. Hadden has asked a federal court, the U.S. District Court for the Western District of Kentucky, to overturn FINRAs arbitration award which ordered him to repay over $300,000 in bonus money, attorneys’ fees and interest. According to Mr. Hadden’s court filings, UBS would allegedly mislabel conservative investors as moderate in order to avoid future restitution and penalties. As Mr. Hadden noted in his court documents, “… the risk reporting system is done … to protect UBS from future claims of lack of suitability from the client or FINRA.”
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Parkland Securities, LLC (Parkland) f/k/a Sammons Securities Company, LLC, was fined $100,000 by the Financial Industry Regulatory Authority (FINRA) for numerous failure to supervise violations. Without admitting or denying the findings, Parkland consented to the sanctions and to FINRA’s findings.

FINRA found that Parkland relied too heavily upon an outside entity with a limited number of persons to conduct all of the supervisory and compliance functions for its 1,274 registered representatives and 854 branch offices. Also, FINRA found that Parkland’s system for reviewing its employees’ emails was inadequate, as was its system for the supervision of its customers’ confidential information, such as ensuring its representatives were using passwords, anti-virus software and anti-spyware tools. Continue Reading