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FINRA Investor Alert: Stock-Based Loan Programs

Stock-Based Loan Programs: What Investors Need to Know

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the risks and rewards of non-recourse stock-based loans, loans which are given to borrowers who pledge fully paid securities as collateral to the lenders. This collateral is the only recourse the lenders have with which to reclaim the loans from the borrowers. The lender holds the securities during the period of the loan and returns them - with profits...

FINRA Investor Alert: Reverse Mortgages

Reverse Mortgages: Avoiding a Reversal of Fortune

The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert to help investors make informed decisions on whether or not to take out a reverse mortgage. A reverse mortgage is a loan that is secured by the equity of the borrower's home. A reverse mortgage converts the equity into cash and the loan is paid off when the borrower dies or moves out and sells his or her home.

Investors should beware of a few things. Firstly,...

FINRA Investor Alert: Equity-Indexed Annuities

Equity-Indexed Annuities - A Complex Choice

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the rewards and risks of equity-indexed annuities. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. Equity-indexed annuities (EIA) are similar to both fixed and variable annuities. They pay an interest rate linked to an equity index and guarantee...

FINRA Investor Alert: Variable Annuities [Update]

Variable Annuities: Beyond the Hard Sell

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert to help investors decide on how to invest for retirement. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments.

Annuities can carry costs and risks that many investors may not be aware of because brokers who are incentivized by commission-generation do...

FINRA Investor Alert: Leveraged and Inverse ETFs

Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors

The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert to help investors understand the performance objectives of leveraged and inverse exchange-traded funds.

Exchange-Traded Funds is an investment fund that holds stocks, bonds, or commodities and typically tracks specific indices representing such asset classes. Introduced in 1993 by State Street Global Advisors, ETFs...

FINRA Investor Alert: Life Settlements

Seniors Beware: What You Should Know About Life Settlements

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on life settlement. Life settlement is the transaction that involves selling one's life insurance policy to a third party that did not issue the policy for a lump sum payment whose value is higher than the policy's cash surrender value but less than the net death benefit.

Because life settlement is targeted at senior people, the industry can be...

FINRA Investor Alert: Municipal Bonds

Municipal Bonds-Staying on the Safe Side of the Street in Rough Times

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on municipal bonds. This provides a thorough background on municipal bonds and advice on investing.

There are certain risks in investing in municipal bonds. For example, the municipality issuing the municipal bonds can default, leading to the loss of some (if not all) interest and principal to the investor. This is called default risk....

FINRA Investor Alert: Auction Rate Securities

Auction Rate Securities: What Happens When Auctions Fail

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on auction rate securities (ARS). This provides quite a thorough background on ARS, their auction mechanism and risks of failure, alternatives to ARS, and redemption and liquidity issues.

ARS are issued widely by institutions ranging from closed-end mutual funds, municipalities to student loan trusts. ARS are long-term floating rate securities whose...

FINRA Investor Alert: Cat Bonds

Catastrophe Bonds and other Event-Linked Securities

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on catastrophe bonds, or 'cat bonds'. Cat bonds pay higher interest rates compared to the equivalent corporate bonds.

However, there are risks involved in holding cat bonds. Investors of a cat bond can lose interest and principal if the catastrophe, to which the bond is linked, occurs. Cat bonds are quite illiquid, the pricing information are generally not...

FINRA Investor Alert: Variable Annuities

Should You Exchange Your Variable Annuity?

The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on how to determine if investors should exchange their variable annuity for another model. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments.

While equity-indexed annuities have become increasingly popular, some have questioned their value and...

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