FINRA Announces Requirement of Heightened Supervision of Complex Products in NASD Notice to Members 12-03

Stockbroker Law - Tuesday, March 05, 2013
FINRA Announces Requirement of Heightened Supervision of Complex Products in NASD Notice to Members 12-03

The Financial Industry Regulatory Authority (FINRA) has recently defined complex products to include many of the investment vehicles whose risks were exposed during the financial crisis of 2008-2009.  Examples of complex products include the following:

 

  • Asset-backed securities secured by a pool of collateral, such as mortgages, payment from consumer credit cards, or future royalty payments.

 

  • Embedded derivative component products, such as structured notes with an embedded derivative for which the reference asset is a constant maturity swap rate.

 

  • Structured notes with payoffs contingent upon the future performance of a reference asset.

 

  • Reverse convertible notes in which an investor might incur a capital loss as a result of the fall in the value of a reference asset.

 

  • Reverse convertible notes with a “knock in” or “knock out” feature.

 

  • Range accrual notes.

 

  • Structured notes with “worst-of” features.

 

  • Exchange-traded products such as products providing inverse or leveraged exposure (i.e., CBOE volatility index [VIX]).

 

  • Principal protection products, which can lose their principal protection based upon a stated event.

 

  • Structured products with leveraged returns that are reset daily (i.e., leveraged or inverse exchange-traded funds, including leveraged and inverse ETF’s that are reset daily, meaning that they are designed to achieve their stated leverage or inverse objectives on a daily basis.)

 

  • Products with complicated limits or formulas for the calculation of investor gains.

 

We offer a free consultation to investors who feel they have been improperly sold complex products.

 

The Law Offices of Timothy J. O’Connor is one of the only law firms practicing securities law in the Tri-City Capital District of Albany, Schenectady and Troy.  We also represent victimized investors throughout the rest of New York State, including Buffalo, Binghamton, Syracuse, Watertown, Utica, Kingston, New York City/Manhattan, Long Island, and everywhere in between, as well as in the surrounding states of Massachusetts, Vermont, New Hampshire, Connecticut, and New Jersey.


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