The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Benjamin Fordham (Fordham), currently employed by LPL Financial LLC has been subject to at least one disclosable event. These events include one customer complaint. According to records kept by The Financial Industry Regulatory Authority (FINRA), Fordham’s most recent customer complaint alleges that Fordham recommended unsuitable investments in structured products and makes allegations concerning misconduct relating to the handling of the customer’s accounts.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $100,000.00 on November 07, 2022.
Claimants allege unsuitable recommendations of structured products. Activity period February 2015 to November 2022.
Structured products are a class of derivative products that derive their performance from market linked data. A structured product usually derives its market risk exposure from a specific reference source. The source may be a single security, a collection of securities like a market index, commodities, interest rates, or a real estate loan portfolio. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.
Most structured products tend to have less favorable risk/return profiles than traditional debt or equity instruments because large banks, which issue these products, aim to profit from the difference between what they pay investors and the returns they generate from issuing structured notes, after deducting commissions and fees for brokers. Due to the intricate nature of these products, many investors will lack the ability to accurately weigh their merits or estimate the probability of returns versus losses. Many brokers falsely present these investments as fixed income or bond equivalents with capital return. Structured products pose a greater risk of loss than corporate debt and other fixed-income alternatives, making them an inappropriate choice for fixed-income recommendations.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. Examples of structured products linked to single securities illustrate the high risks involved without offering meaningful advantages. Our firm examined a structured note tied to Peloton’s stock, offering investors 1.0625% interest per month (12.75% annually), and another note linked to Zillow’s stock, which promised a 12% annual interest paid monthly, provided the stock prices remained above a set threshold. The interest payment would be fully canceled only if both stocks suffered a roughly 40% decline in value. In addition, if the stocks lost more than approximately 40% of their value then the investor would also lose their corresponding principal based upon the performance of the stocks and could lose their entire investment. Further, the notes were callable and could be cancelled by the sponsor.
These products are very high risk and low reward propositions because the investor can only profit at most by 12-12.75% over the course of one year. Even if Peloton or Zillow doubled in value all the investor could achieve would be the interest payment as their profit and none of the price appreciation. Meanwhile the maximum loss is 100% of the investment if the stocks fell severely. Accordingly, the investor takes dramatic downside risks associated with the volatile stocks while having no chance to participate in the success of the stock.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases.
Fordham entered the securities industry in 2002. Fordham has been registered as a Broker with LPL Financial LLC since 2017.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.