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


  • 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


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


  • Range accrual notes.


  • Structured notes with “worst-of”


  • 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
, Schenectady and
.  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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