Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Jorge Menendez (Menendez), currently employed by Citigroup Global Markets 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), Menendez’s most recent customer complaint alleges that Menendez 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 $800,000.00 on December 11, 2023.
Claimants alleges that in 2021, Financial Advisor, Jorge Menendez over-concentrated claimants’ portfolio of esoteric Auto-callable Structured Notes.
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. 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.
Compared to traditional debt or equity instruments, structured products generally yield inferior risk/return profiles, as the issuing brokerage firms—primarily large banks—profit from the spread between investor payouts and the earnings from issuing structured notes, after accounting for broker commissions and fees. Due to the complexity of these products most investors will lack the ability to understand the merits of these investments or compute the probabilities of return versus loss. Many brokers falsely present these investments as fixed income or bond equivalents with capital return. Because structured products carry a higher risk of loss compared to corporate debt and other fixed-income investments, they should not typically be recommended as fixed-income alternatives.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. A few cases of structured products based on single securities reveal their excessive risk while lacking meaningful advantages. We analyzed a structured note associated with Peloton’s stock that guaranteed investors 1.0625% monthly interest (12.75% annually) and a similar note tied to Zillow’s stock, offering 12% annual interest paid monthly, contingent on the stock prices staying above a specified level. The interest payment would only be completely eliminated if both stocks dropped by approximately 40% 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.
Menendez entered the securities industry in 2007. Menendez has been registered as a Broker with Citigroup Global Markets 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.