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TAG | floating rate bank loan funds liquidity risks

Nov/11

16

FINRA Fines JPMorgan Unit $1.7M for Putting Conservative Clients in Unsuitable Investments

Comments off · Posted by Securities Lawyer in FINRA

 In a November 15th., 2011, Bloomberg Businessweek article they write that a unit of JPMorgan Chase & Co. was ordered to reimburse investment customers more than $1.9 million and was fined $1.7 million over how it sold unit investment trusts and floating-rate loan funds.

FINRA, the Financial Industry Regulatory Authority announced the settlement on Tuesday after its investigators found that brokers with Chase Investment Services Corp. made purchase recommendations to investors who weren’t suited to the complex investments. The securities industry’s self-regulatory body, FINRA, said that the products were pitched to “unsophisticated customers with little or no investment experience and conservative risk tolerances.”

The Bloomberg article goes on to say that FINRA also faulted Chase’s supervisory procedures to monitor sales of UITs and floating-rate loan funds. Chase did not provide brokers with sufficient training and guidance regarding the risks and suitability of UITs and floating-rate funds.

A UIT is decribed as an investment in baskets of diversified securities which can include high-yield bonds. That category, also known as junk bonds, can earn investors greater returns than investment-grade bonds, but junk bonds also are more volatile, with a higher risk of loss.

The description of floating-rate loan funds are mutual funds that invest in short-term bank loans made to companies whose credit is rated below investment grade. The income that investors receive adjusts with changes in the interest rate that banks charge on the loans.

The Bloomberg article says that Chase brokers made almost 260 unsuitable recommendations to purchase UITs to customers, FINRA said. Those customers suffered losses of about $1.4 million as a result of their purchases.

FINRA said the floating-rate loan funds that Chase sold were subject to significant credit risks, and some were invested in assets that could not easily be sold and converted to cash. Customers suffered losses of nearly $500,000 as a result of Chase’s recommendations, FINRA said.

In concluding the settlement, Chase neither admitted nor denied the findings, but consented to them, FINRA said.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses through JP Morgan Case & Co., or Chase Investment Services Corp., call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Aug/11

1

FINRA Warns About Risky Investments

Comments off · Posted by Securities Lawyer in FINRA

In an article from InvestmentNews.com, on July 25, 2011, Dan Jamieson writes that FINRA has warned investors about chasing yield with structured products, junk bonds and floating-rate bank-loan funds.

The Financial Industry Regulatory Authority (FINRA) issued an investor alert about the risks found in these and other products. The alert was prompted by “significant recent inflows” into high-yielding products, Finra said.

“Investors should always look behind an investment’s yield, ensure that they understand how the investment works and carefully consider its fees and risks before investing,” Gerri Walsh, vice president for investor education, said in a statement.

The structured products “can have significant drawbacks such as credit risk, market risk, lack of liquidity and high hidden costs,” the alert said.

Jamieson goes on to say that FINRA warned investors to watch for structured products that are callable, promise principal protection or have returns based on changes in the yield curve. While such investments could produce attractive returns, they also might “earn no return for the entire term of the note,” the alert said.

Also, FINRA warned that the market for floating-rate loans is “largely unregulated, relatively illiquid and difficult to value.”

The InvestmentNews.com article adds, FINRA says that floating-rate bank-loan funds may be less vulnerable to interest rate fluctuations, as well as offering inflation protection. The underlying loans, however, are “are subject to significant credit, valuation and liquidity risk.”

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have lost your investments through these risky investments, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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