Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Joel Beeson (Beeson), previously employed by Bbva Securities INC. 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), Beeson’s most recent customer complaint alleges that Beeson 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 $42,430.00 on March 23, 2020.
Customer purchased structured note in February, 2020. Following receipt of account statement, customer complained to the firm that the investment was unsuitable for her because of the fluctuation in value and her risk tolerance. Customer liquidated the position before her complaint was received by the firm, locking in the market loss.
Structured products are a class of derivative products that derive their performance from market linked data. The market risk of a structured product is typically linked to an underlying reference. A single security, a set of securities like a market index, commodities, interest rates, or a portfolio of real estate loans each can serve as the source. 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. These investments are often misrepresented by brokers as fixed income or bond-like options that provide a return of capital. Due to their elevated risk of loss in comparison to corporate debt and fixed-income alternatives, structured products are rarely a suitable replacement.
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. We conducted an analysis of a structured note based on Peloton’s stock, guaranteeing investors a 1.0625% monthly return (12.75% annually), and another note tied to Zillow’s stock, which offered 12% annual interest paid in monthly installments as long as the stock prices stayed above a predefined value. The interest payment remains intact unless both stocks experience a loss of about 40% of their 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.
Beeson has been in the securities industry for more than 15 years. Beeson has been registered as a Broker with Bbva Securities INC. since 2013.
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.