Structured products are extremely complex investment instruments. Brokerage firms and brokers have recommended these investments to clients claiming that structured products are conservative investments (sometimes with guarantees that all principal will be returned) that generate current income and carry a high credit rating.
One of the most common structured products are those linked to a particular stock or sector of the market. The source can be a single security, a basket of securities such as a market index, commodities, or a real estate loan portfolio. Many structured products also have leverage features in order to enhance the investment returns and others incorporate purported downside protections to ensure that the investor will, at a minimum, receive a return of his/her principal. A key feature of structured products, which is often not disclosed, is illiquidity. Many structured products do not provide an investor an opportunity to sell the investment without incurring a significant penalty.
Brokerage firms have an obligation to perform a suitability analysis before recommending structured products to investors. In order to ensure that the structured product is suitable, firms must ensure that the investment is priced so that the potential yield is appropriate in relation to the volatility of the referenced asset. Brokerage firms must also ensure that the structured product is suitable for the individual investor based upon the investor’s investment objectives.
The Wolper Law Firm has extensive experience handling claims involving structured products. If you believe that you were improperly sold a structured product or have experienced unexpected losses in these investments, please contact the Wolper Law Firm for a free consultation and case evaluation.