FINRA Press Release: Inverse Floating Rate CMOs
(Aug 2010)
FINRA Fines HSBC $375,000 for Unsuitable Sales of Inverse Floating Rate CMOs to Retail Customers and Related Supervisory Failures
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has fined HSBC Securities (USA) Inc. $375,000 for recommending unsuitable sales of inverse floating rate Collateralized Mortgage Obligations (CMOs) to retail customers. HSBC failed to adequately supervise the suitability of the CMO sales and fully explain the...
FINRA Press Release: Unit Investment Trusts
(Aug 2010)
Merrill Lynch to Pay More Than $2.5 Million Related to UIT Sales Charge Discount Failures
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
it has fined Merrill Lynch $500,000 for failing to provide sales charge discounts to customers on eligible purchases of Unit Investment Trusts (UITs). FINRA also found that Merrill Lynch failed to have an adequate supervisory system in place to ensure customers received appropriate UIT discounts....
SLCG Research: Leveraged ETFs
(Aug 2010)
SLCG released today 'Leveraged ETFs, Holding Periods and Investment Shortfalls'.
Exchange-Traded Funds is an investment fund that holds stocks, bonds, or commodities and typically tracks specific indices of such asset classes. Leveraged and inverse leveraged ETFs were first introduced to the market in June 2006 by ProFunds, which promiseds to return a multiple of the underlying index return by rebalancing their portfolios at the end of each day. The total market value of leveraged and...
In the News: Equity-Indexed Annuities
(Aug 2010)
An annuity makes periodic payments to the holder of the annuity. Fixed annuities make fixed payments and variable annuities make variable payments. Equity-indexed annuities (EIAs) are similar to both fixed and variable annuities in that they pay an interest rate linked to an equity index and guarantee a minimum interest rate. EIAs are especially marketed to retirees by the insurance industry.
Forbes published an article on EIAs. The article evaluates the claims made by typical marketers...
In the News: Structured Notes
(Aug 2010)
Structured Notes Are Wall Street's `Next Bubble,' Whalen Says
Bloomberg issued a news release today discussing the topic of a structured products bubble in Wall Street. According Christopher Whalen, managing director of Institutional Risk Analytics, the sale of structured products allows the selling firms to make bets on interest rates. Furthermore, they are illiquid products for which firms are not obligated to make markets and hence provide liquidity when these products might need them...
FINRA Press Release: Subprime Securitizations
(Jul 2010)
FINRA Fines Deutsche Bank Securities $7.5 Million for Negligent Misrepresentations Related to Subprime Securitizations
The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that
"it has fined Deutsche Bank Securities Inc. $7.5 million for negligently misrepresenting delinquency data in connection with the issuance of subprime securities."
The settlement is detailed in the FINRA AWC No. 20080128087. According to FINRA, Deutsche Bank Securities...
SLCG Research: Principal Protected Notes
(Jul 2010)
SLCG released today 'The Anatomy of Principal Protected Absolute Return Notes'.
Structured products are debt securities that often have unconventional and complex payoff structures. Their payoffs are often linked to a security or index, such as the S&P 500 or the Russell 2000, with asset classes ranging from equity, commodities, currencies and debt. A Principal Protected Absolute Return Barrier Note (ARBN) is one structured product that returns the absolute value of the return of the...
SLCG Research: Preferred Stock Portfolios
(Jun 2010)
SLCG released today 'The Risks of Preferred Stock Portfolios'.
Preferred stocks have characteristics similar to both debt and equity. Like debt, preferred stocks make fixed or floating dividend payments similar to coupon payments of debt. Like equity, the dividend payments are not an obligation of the issuer and a failure to make dividend payments does not constitute a default. Holders of preferred stocks have claims on the income and assets of the issuing company before common equity...
SLCG Research: Reverse Convertibles
(Jun 2010)
SLCG released today 'What TiVo and J.P. Morgan teach us about Reverse Convertibles'.
Structured products are debt securities that often have unconventional and complex payoff structures. Their payoffs are often linked to a security or index, such as the S&P 500 or the Russell 2000, with asset classes ranging from equity, commodities, currencies to debt. A reverse convertible note is an equity-linked structured product. It is a short-term note that pays a relatively high coupon rate...
