Warnings from both FINRA and the SEC on Complex Investments

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, would like all investors to take note of the warnings coming from both FINRA, the Financial Industry Regulatory Authority, and the SEC, the Securities and Exchange Commission this past week.

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

FINRA warned investors about chasing yield with structured products, junk bonds and floating-rate bank-loan funds. The alert was initiated by "significant recent inflows" into high-yielding products, FINRA said.

Structured products "can have significant drawbacks such as credit risk, market risk, lack of liquidity and high hidden costs," the alert said. Finra also warned that the market for floating-rate loans is "largely unregulated, relatively illiquid and difficult to value." The underlying loans, however, are "are subject to significant credit, valuation and liquidity risk."

The SEC released a report last Wednesday also, saying that broker-dealers have been engaging in sales practices for structured securities products that hurt retail investors. Adding that firms may have steered clients into the complex products even though they were not suitable for their portfolios.

The SEC says the riskiest structured products, according to their report, is a reverse convertible note, which is a security with an embedded put option.

Attorney Lars Soreide adds, "When both FINRA and the SEC are sending out warnings, all investors need to be careful when your broker/dealer wants you to consider purchasing complex investment products.  Make sure you know the product and what your risks are before purchasing them."

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have lost your investments through 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.