The law offices of Gana Weinstein LLP filed a claim on behalf of a retired 66 years old widow concerning the mismanagement of her retirement savings. The case alleged that Wells Fargo representative Allen Wilson (Wilson) recommended an overconcentration in unsuitable structured products that caused devastating losses to the Claimant’s portfolio jeopardizing her retirement.
Claimant alleged that she and her husband met Wilson in 2001 and for some time her savings were concentrated mostly in corporate and municipal bonds. The Claimant alleged that she told Wilson that she was retired, collected social security, and wanted additional income from her accounts to cover expenses while preserving principal. However, Wilson began recommending very complex structured products that the ordinary investor would not be able to understand. These structured products were alleged to not be appropriate investments for income and a desire for preservation of capital.
The structured products at issue referenced two different bond yield curves and one stock market index in order to compute both if interest is owed paid and how much. As alleged, a probability and statistics degree is needed to even begin to comprehend the probabilities of payment on this instrument.
Claimant alleged that – assuming the S&P 500 Index performs well – the spread between interest rates on various treasuries can cause this product to fail. The investments recommended to Claimant referenced the spread between the 2 year and the 5, 10, and 30 year treasury bonds. Generally, the wider the spread the greater the profit from the structured product. In addition, Claimant would only recover their principal if she held the structured products until maturity. But Claimant alleged that as a retired investor it was not reasonable for her to hold the structured products until they matured between 2028 and 2037.
Due to changes in the bond markets the structured products now pay 0%. In addition, the market for these products has collapsed as investors now demand steep discounts on the purchase price to compensate for the lack of interest payments. In sum, Claimant alleged that the structured product behaves like a speculative options contract set to mature 10 to 15 years in the future. As a result, the structured products have stopped paying interest and have decreased in value between 40-50%.
Against this background, by June 2015 Wilson is alleged to have recommended that Claimant invest 70% of all of Claimants’ assets in the structured products. In addition, Claimant alleged that Wilson then took steps to fraudulently alter Claimants’ records and statements in order to make her – in hindsight – a suitable investor for speculative investments. Claimant alleged that in November 2016 Wilson fraudulently labeled Claimant as an “Aggressive” investor without having the client sign any documents or even being made aware that any change to her accounts had occurred.
Shockingly, it was alleged that when Claimant complained to Wells Fargo the firm told Claimant that not only are the investments suitable for her but that she made money and has no claim against the firm.
Investors who have suffered losses due to investments in structured products are other securities 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.