Wolper Law Firm Files Large FINRA Arbitration Arising Out Of The Sale Of Adjustable Rate Structured Notes By Broker, Joseph Andreoli?
Joseph Andreoli a/k/a Joe Andreoli (CRD # 1718688) was a Financial Advisor at Wells Fargo Advisors in Paramus, New Jersey. Joseph Andreoli has been in the securities industry since 1987 and previously worked at Citigroup Global Markets, Inc. and its predecessor Smith Barney, Inc. Joseph Andreoli currently works for Raymond James & Associates.
On August 8, 2019, the Wolper Law Firm filed a FINRA arbitration claim against Wells Fargo Advisors, alleging damages of between $1 million and $5 million. The allegations of misconduct relate to the recommendation by Financial Advisor Joseph Andreoli that our client, an inexperienced investor, invest more than $6 million in illiquid, adjustable rate structured notes. In order to facilitate the investment strategy, Mr. Andreoli further recommended that the customer first sell a basket of highly rated municipal bonds to raise the necessary capital.
The Statement of Claim alleges:
“This case is about the sale of an over-concentrated portfolio of long-term and esoteric adjustable rate structured notes to a young and inexperienced investor. The income stream of the structured notes is dependent upon a complex formula calculated by the relationship between various indices and the Constant Maturity Swap rate (“CMS Rate”). None of these complexities were ever explained to Claimant nor would they have ever been understood. With the rise of interest rates over the last two years from historic lows, and the corresponding flattening of the yield curve, the interest rate has adjusted on Claimant’s investments and they now pay zero income. Moreover, because they are long-term investments paying zero income, the principal value of these investments has precipitously declined and are virtually illiquid. Claimant is now faced with the prospect of holding non-income producing fixed income assets until maturity (2028-2034) or attempting to sell these investments at a steep loss.”
Investors are lured into a structured product with a promise of better returns and principal protection. This is generally not the case. Structured, adjustable rate notes come in several varieties but have similar core characteristics. Adjustable rate, structured products traditionally pay investors a teaser interest rate in the first 12-36 months of ownership, at which time the formula for calculating interest changes. The investor may be forced to hold the security until maturity at a significantly lower interest rate, sometimes zero, rendering the average interest rate earned on the structured product virtually the same as a traditional, but less costly or more liquid, investment alternative. When the structured products are long-term, as is the case with our client’s investments, the principle value declines, making liquidation nearly impossible unless the client is willing to realize a steep loss
Years ago, the Federal Reserve made clear its intent to raise rates after keeping them artificially low for many years. Inistead of steering our client away from the adjustable rate, structured notes, Mr. Andreoli recommended the purchase of $6 million in 2016 alone. As rates began to rise, the spread between long-term and short-term rates predictably narrowed, causing a compression in the yield curve. By 2018, the yield curve flattened and, in 2019, it inverted.
The impact of these economic events had a significant impact on the adjustable rate, structured notes recommended by Joseph Andreoli. The client first experienced a decline in and, ultimately, complete elimination of the income stream that Joseph Andreoli represented he would receive. Contemporaneous with the loss of income, the principal value of the investments declined precipitously and the secondary market evaporated. At present, the client is facing the prospect of holding long-term investments that pay no income until maturity, which is between 2028-2034.
The arbitration claim seeks compensatory damages for the loss of principal and income, rescission and
This is not the first customer complaint filed against Joseph Andreoli. In 2000, a customer filed an arbitration claim, alleging “CLAIMANT ALLEGED UNSUITABILITY, NEGLIGENCE, BREACH OF CONTRACT, BREACH OF FIDUCIARY DUTY, FRAUD, VIOLATION OF INDUSTRY RULES, FEDERAL SECURITIES LAWS AND TEXAS STATUTES REGARDING TRADING OF TREASURY BONDS ON MARGIN FOR CAPITAL GAINS.” The dispute went to a final arbitration hearing and the customer was awarded $56,555.
In 2010, a customer alleged “CLAIMANT ALLEGES, INTER ALIA, THAT BEGINNING IN JUNE OF 2007 THE FINANCIAL ADVISOR MADE UNSUITBALE INVESTMENTS IN THE CLAIMANT’S ACCOUNTS.” The dispute was settled for $175,000.
Four other customers filed complaints against Joseph Andreoli but they were wither withdrawn or denied by the firm.
For a copy of Joseph Andreoli’s BrokerCheck report, click https://brokercheck.finra.org/individual/summary/1718688#disclosuresSection
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at firstname.lastname@example.org.