Shane Appelbaum Has Investor Complaint Over Fixed Income Sales

shutterstock_187083428-300x198The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Shane Appelbaum (Appelbaum), currently employed by Herbet J. Sims & Co, Inc. (Herbert J. Sims) has been subject to at least two customer complaints and one criminal matter during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), one of Appelbaum’s customer complaints likely involves the sale of structured products.  The complaint alleges that Appelbaum recommended unsuitable investments in what are referred to as CDs issued by several banks.

In February 2020 a customer complained that Appelbaum violated the securities laws by alleging that Appelbaum made unsuitable sales of $75,000 in a Bank of America CD purchased in Oct. 2014, maturing 2030 and a $240,000 Citibank CD purchased in Jan. 2014, maturing 2034 purchased for the partnership which is beneficially owned by an elderly husband and wife.  The claim alleges $86,864.90 and is currently pending.

In June 2018 a customer complained that Appelbaum violated the securities laws by alleging that Appelbaum’s investment recommendations involved unsuitable trades, negligence, fraud, and misrepresentation. The claim was settled for $40,000.

Structured products range in risk from benign to extreme.  However, most structured products produce inferior risk/return profiles than ordinary debt or equity instruments because the brokerage firms that issue these products seek to profit from the spread between the payment to investors and the amount of money the brokerage firm can make from the issuance.  When dealing with some of the more complex structured products most investors will lack the ability to understand the merits of investments nor are many structured products appropriate for investors seeking a fixed or reliable income and preservation of capital.

The law offices of Gana Weinstein LLP are currently representing investors who were surprised to find out that the “bonds” or “CDs” that were recommended by their advisors have almost completely stopped paying interest while plummeting in value.  What many investors in this situation did not realize was that they were not sold bonds at all but instead complex structured products that go by a variety of names including steepener notes, adjustable rate market notes, spread linked notes, or structured notes.  Regulators have already stated that it is improper to sell these investments as a fixed income substitute or to compare them to bonds in terms of producing a revenue stream.  However, in our firm’s experience it appears that many brokers have been selling structured products as bond alternatives.

Some of the more complex structured products that our firm is seeing reference two different bond yield curves and sometimes one stock market index in order to compute if interest will be paid and how much.  A math degree is needed to even begin to comprehend the probabilities of payment on these kinds of instruments.  The biggest driving factor on payment – assuming the S&P 500 Index performs well – is the spread between interest rates on various treasuries.  The structured products often reference the spread between either the 2 year and the 5, 10, and 30 year treasury bonds for the most part.  The wider the spread the greater the profit and payment from the structured product.

When the spread goes negative an inversion of the yield curve occurs.  During these periods these types of structured products can pay as little as 0% for years at a time.  In addition, the market for these products collapses as investors will demand steep discounts on the purchase price to compensate for the lack of interest payments.  These disasterous structured products can put investors in real conundrum – either wait a decade or more for full repayment or sell now at steep loses.  For some investors the maturity date may exceed their actual lifespans.

Moreover, we have represented clients in claims where it difficult for the investor to determine that these structured products are anything other than merely a corporate bond on their account statements.  Many firms list these structured products as corporate bonds or fixed income deceiving investors into believing that the investment has a similar risk / reward profile.  Accordingly, many investors lack any way to assess the risks taken in their accounts or the distinct and speculative nature of the structured products recommended.

Appelbaum entered the securities industry in 2004.  Since March 2004 Appelbaum has been associated with Herbert J. Sims out of the firm’s Boca Raton, Florida office location.

Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors may be able recover their losses through securities arbitration.  The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives.  Our consultations are free of charge and the firm is only compensated if you recover.

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