Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Nicholas Stamatis (Stamatis), currently employed by Ameriprise Financial Services, 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), Stamatis’s most recent customer complaint alleges that Stamatis 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 $80,000.00 on April 17, 2024.
Claimants allege advisor recommended unsuitable investments of variable annuities and structured notes.
Marketlinked data drives the performance of structured products, which are a type of derivative. A structured product is commonly tied to a reference index that determines its market risk. 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.
Compared to traditional debt or equity instruments, structured products generally yield inferior risk/return profiles, as the issuing brokerage firms—primarily large banks—profit from the spread between investor payouts and the earnings from issuing structured notes, after accounting for broker commissions and fees. Because these products are complex, the majority of investors will find it challenging to evaluate their value or determine the probability of profit versus loss. Many brokers falsely present these investments as fixed income or bond equivalents with capital return. 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. A couple of examples of structured products linked to single securities shows the extreme risk of these products without meaningful benefit. Our firm examined a structured note tied to Peloton’s stock, offering investors 1.0625% interest per month (12.75% annually), and another note linked to Zillow’s stock, which promised a 12% annual interest paid monthly, provided the stock prices remained above a set threshold. The interest payment would be fully canceled only if both stocks suffered a roughly 40% decline 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.
Stamatis entered the securities industry in 2005. Stamatis has been registered as a Broker with Ameriprise Financial Services, LLC since 2005.
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.