Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Brian Bates (Bates), currently employed by LPL Financial LLC 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), Bates’s most recent customer complaint alleges that Bates recommended unsuitable investments in structured products and makes allegations concerning misconduct relating to the handling of the customer’s accounts.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $500,000.00 on February 13, 2023.
Claimants allege that their representative recommended unsuitable structured notes for their account. Activity period: November 2021 to September 2023.
Marketlinked data drives the performance of structured products, which are a type of derivative. A structured product usually derives its market risk exposure from a specific reference source. A source might include a single security, a basket of securities like a market index, commodities, interest rates, or a portfolio of real estate loans. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.
Structured products typically offer less attractive risk/return profiles than conventional debt or equity investments, as issuing firms—mainly large banks—capitalize on the difference between investor returns and the earnings from issuing structured notes, after subtracting commissions and fees paid to brokers. Due to the intricate nature of these products, many investors will lack the ability to accurately weigh their merits or estimate the probability of returns versus losses. Brokers frequently describe these investments to clients as fixed income or bond-like, despite their true nature. Given the high risk of loss relative to corporate debt and other fixed-income options, structured products are generally unsuitable as fixed-income alternatives.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. The extreme risk of structured products associated with single securities is evident in multiple examples, showing little to no real benefit. 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.
Bates entered the securities industry in 1993. Bates has been registered as a Broker with LPL Financial LLC 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.