Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Ghislain Gouraige (Gouraige), currently employed by Newedge Securities, 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), Gouraige’s most recent customer complaint alleges that Gouraige 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 $26,000.00 on September 16, 2022.
Customer alleges unsuitable investment allocations to international growth and emerging markets stocks, lack of diversification in managed account structured note portfolio and misrepresentations regarding tax exempt municipal bond yields.
Market data drives the performance of structured products, which can be viewed as a group of derivatives.
Market risk in a structured product is generally taken based on a referenced source. The origin could be a single security, multiple 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.
Most structured products tend to have less favorable risk/return profiles than traditional debt or equity instruments because large banks, which issue these products, aim to profit from the difference between what they pay investors and the returns they generate from issuing structured notes, after deducting commissions and fees for brokers. 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. Due to their elevated risk of loss in comparison to corporate debt and fixed-income alternatives, structured products are rarely a suitable replacement.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. Several examples of structured products tied to individual securities highlight the extreme risks of these investments without providing significant benefits. We conducted an analysis of a structured note based on Peloton’s stock, guaranteeing investors a 1.0625% monthly return (12.75% annually), and another note tied to Zillow’s stock, which offered 12% annual interest paid in monthly installments as long as the stock prices stayed above a predefined value. Only if both stocks depreciate by nearly 40% would the interest payment be entirely removed. 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.
Gouraige entered the securities industry in 1994. Gouraige has been registered as a Broker with Newedge Securities, LLC since 2022.
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.