Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Steven Lovell (Lovell), currently employed by Cetera Investment 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), Lovell’s most recent customer complaint alleges that Lovell 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 $18,604.42 on December 22, 2022.
Client alleges surrender schedule and charges, in relation to her Equitable Structured Cap Strategies VA, were not disclosed at the time of purchase in August 2022.
Market data drives the performance of structured products, which are a type of derivative. A structured product generally references a source against which market risk is taken. It can originate from a single security, a group of securities such as 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.
Since large banks issuing structured products seek to maximize their profits, these products often provide suboptimal risk/return profiles relative to traditional debt or equity instruments due to the spread between investor payouts and the revenues generated from issuing structured notes, minus 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. Some brokers inaccurately market these investments as fixed income or bond-like instruments that return capital. Structured products pose a greater risk of loss than corporate debt and other fixed-income alternatives, making them an inappropriate choice for fixed-income recommendations.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. Examples of structured products linked to single securities illustrate the high risks involved without offering meaningful advantages. 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. Both stocks could lose around 40% of their value before the interest payment would be eliminated entirely. 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.
Lovell entered the securities industry in 2011. Lovell has been registered as a Broker with Cetera Investment Services LLC since 2024.
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.