Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Evan Lunsford (Lunsford), 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), Lunsford’s most recent customer complaint alleges that Lunsford 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 on August 18, 2023.
Customer alleges that during the time period 2018-2020, representative made investment recommendations in structured notes tied to the energy market that were unsuitable for claimant’s investment objectives.
The performance of structured products, driven by the market data, are a type of derivative. Market risk in a structured product is generally taken based on a referenced source. A source might include a single security, a basket of securities like a market index, commodities, interest rates, or a portfolio of real estate loans. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.
However, most structured products produce inferior risk/return profiles than ordinary debt or equity instruments because the brokerage firms that issue these products, mostly large banks, seek to profit from the spread between the payment to investors and the amount of money the brokerage firm can make from the issuance of the structured notes minus the commissions and fees that must be paid to brokers selling the product. Because these products are complex, the majority of investors will find it challenging to evaluate their value or determine the probability of profit versus loss. Brokers frequently describe these investments to clients as fixed income or bond-like, despite their true nature. Given the high risk of loss relative to corporate debt and other fixed-income options, structured products are generally unsuitable as fixed-income alternatives.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. Structured products connected to individual securities demonstrate significant risk without delivering substantial rewards. Our firm analyzed a structured note linked to the stock of Peloton that promised to investors 1.0625% interest monthly or 12.75% annually and another note linked to the stock of Zillow which promised a 12% annual interest payment paid monthly so long as the respective stock prices stayed above a referenced value. 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.
Lunsford entered the securities industry in 2010. Lunsford has been registered as a Broker with LPL Financial LLC since 2015.
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.