Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Thomas Brunt (Brunt), 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), Brunt’s most recent customer complaint alleges that Brunt 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 $60,000.00 on October 26, 2022.
Claimant alleges they were overconcentrated in unsuitable structured product which resulted in losses.
The performance of structured products, driven by the market data, are a type of derivative. The market risk of a structured product is typically linked to an underlying reference. 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.
Structured products often offer weaker risk/return profiles compared to standard debt or equity investments since the issuing brokerage firms, mainly large banks, seek to earn from the gap between investor payments and the revenue generated from issuing structured notes, minus broker commissions and fees. 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. Some brokers mislead clients by portraying these investments as fixed income or bond-like assets that return capital. 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. Our firm reviewed a structured note linked to Peloton’s stock, which offered investors a 1.0625% monthly return (12.75% annually), along with another note connected to Zillow’s stock that promised 12% annual interest paid monthly, provided the stock prices remained above a reference value. 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.
Brunt entered the securities industry in 2015. Brunt has been registered as a Broker with Cetera Investment Services LLC since 2018.
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.