Investors have the ability to figuratively dip their toes into a wide variety of different opportunities. Among the more controversial types of investments that are considered riskier are junk bonds. Now, these financial instruments can be an excellent option for certain types of investors, but they are by no means the go-to option for novice investors or those unwilling to accept high risk.
Many investors rely on stockbrokers, financial advisors, and financial institutions to make investment recommendations that align with their portfolio. If your broker suggested investment in noninvestment-grade bonds and you suffered dramatic losses, you may be able to recover them in arbitration with the Financial Industry Regulatory Authority (FINRA).
Continue reading to learn more about what junk bonds are, how they work, and how you could get your money back by pursuing a FINRA arbitration complaint.
What Are Junk Bonds?
High yield bonds, also commonly referred to as junk bonds, are bonds that are rated below investment grade. When an investor purchases a junk bond, they have the potential to obtain considerable gains. However, this is not without risk. In order to understand why junk bonds are risky, you have to understand how they work.
You can think of a junk bond as a loan to someone who has a poor credit score. The bond you purchase results in a loan to a struggling company or individual who is usually hoping to remain in business.
Because they have a low credit rating (i.e., the bond is below investment grade), the bond carries a high interest rate. If the bond issuer repays their loan in full, the investor can generate high returns because of this high interest rate.
These high-yield investments are risky because there is a strong possibility that the issuer could fail to make payments or default on the loan altogether. Once a default occurs, it may be difficult to recover your losses from the issuer.
How to Recover Losses Caused by Junk Bonds
Losing your investment on a defaulted junk bond isn’t reason enough to recover your losses in FINRA arbitration. Your stockbroker, financial advisor, or brokerage firm needs to be responsible for the loss in order for your complaint to be successful.
One of the more common reasons why investors lose money on junk bonds is because they weren’t properly informed of exactly how high-yield bonds work, nor were they informed of the risks.
This misrepresentation and potential breach in fiduciary duty could be grounds for full restitution of investment losses caused by junk bonds. Your lawyer will have a better idea of whether you have grounds for a FINRA arbitration complaint after carefully reviewing the details of your case.
Meet with a Junk Bond Loss Attorney
If you’ve suffered dramatic losses caused by your broker’s recommendation that you invest in high-yield bonds, contact a respected lawyer at Wolper Law Firm. Schedule your free, no-obligation consultation when you call our office at 800-931-8452 or complete the convenient contact form included below. Let’s get started on your FINRA arbitration complaint.