Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Michael Rudio (Rudio), currently employed by Purshe Kaplan Sterling Investments 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), Rudio’s most recent customer complaint alleges that Rudio 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 January 24, 2024.
Claimants allege that during the time period December 2020 to November 2021, representative recommended unsuitable investments in structured products.
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. The source can be a single security, a basket of securities such as 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.
Structured products often offer weaker risk/return profiles compared to standard debt or equity investments since the issuing brokerage firms, mainly large banks, seek to earn from the gap between investor payments and the revenue generated from issuing structured notes, minus broker commissions and fees. The intricate nature of these products makes it difficult for most investors to fully comprehend their advantages or calculate the risks and potential returns. These investments are often misrepresented by brokers as fixed income or bond-like options that provide a return of capital. 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. A few cases of structured products based on single securities reveal their excessive risk while lacking meaningful advantages. 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 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.
Rudio entered the securities industry in 2014. Rudio has been registered as a Broker with Purshe Kaplan Sterling Investments since 2021.
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.