Structured Finance

In the heyday of structured products in the very recent past, reverse convertibles became a very popular way for brokers to promise significant income to investors.

However, most brokers seemed to have forgotten or ignored Rule 2310 and NTM’s 03-07 and NTM’s 05-59, which require a fair and balanced presentation of the risks and rewards of a proposed investment.

Brokers have an obligation to perform an individual suitability determination to be certain that a structured product is suitable in light of the customer’s financial status, tax status, investment objectives, and risk tolerance.

Brokerage firms must train registered personnel about the characteristics, risks, and rewards of each structured product before they allow registered persons to sell that product to investors. In connection with such training, members should train registered persons about the factors that would make such products either suitable or unsuitable for certain investors.

All brokers should emphasize that, due to the unique nature of these structured products, many investors, especially retail investors, may not understand the features of the product, and may not fully appreciate the associated risks of investing in them. Moreover, in light of the fact that investors are sold these products as an alternative to traditional equity and fixed income investments, it is crucial for registered persons to have a full and balanced understanding regarding both the risks and the rewards of these products.

From its offices in Connecticut and Florida, the Law Offices of Howard M. Rosenfield has been representing investors nationwide in securities arbitrations and mediations for over 30 years. Please call now, toll free, for more information if you believe that you suffered an investment loss: (860) 677-4334.

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