Investment Product Failure Attorneys | Bakhtiari & Harrison

Product failure attorenys at Bakhtiari & Harrison represents investors who suffered losses in failed or unsuitable securities products in FINRA arbitration claims against the brokerage firms and advisors who recommended them. The critical legal principle: a product failing does not by itself give you a claim. But if the product was unsuitably recommended, misrepresented, or sold without adequate disclosure of its risks, you may have a FINRA arbitration claim against the recommending firm — regardless of whether the product’s issuer has any assets. The firm has recovered more than $250 million. Cases handled on a contingency fee basis. Free consultation.

The key legal principle — why you can sue your broker, not just the product

When an investment product fails, investors often focus on the product itself — the REIT that stopped distributions, the structured note that matured at zero, the private placement that went bankrupt. But the product issuer is often insolvent, liquidated, or beyond the reach of a practical legal claim.

The more viable legal claim is usually against the FINRA-registered broker or firm that recommended the product. Under FINRA Rule 2111 and Regulation Best Interest, every recommendation must be suitable for the specific investor receiving it. A broker who recommended a high-risk, illiquid, complex product to a conservative retiree without adequate disclosure of the risks violated their legal duty — regardless of whether the product itself was fraudulent or simply performed poorly.

This means that even if the product was technically not fraudulent and the issuer did nothing wrong, the recommending broker may still be liable for your losses. FINRA arbitration against the recommending firm is entirely separate from any proceeding involving the product issuer.

Products most commonly involved in FINRA arbitration claims

Non-traded REITs

Non-traded real estate investment trusts are one of the most frequent sources of product failure claims in FINRA arbitration. They are marketed as stable, income-generating alternatives to publicly traded REITs, but carry significant hidden risks: high upfront commissions (often 7–10%), long lock-up periods with limited redemption rights, valuations that may not reflect market reality, and management fees that erode returns. Current investigations include BREIT (Blackstone Real Estate Income Trust). See the firm’s active investigations for current REIT cases.

Structured products — autocallable notes and structured notes

Structured notes and autocallable products are complex instruments whose payoffs depend on the performance of an underlying index, basket of stocks, or reference asset. They are frequently marketed to retail investors as offering downside protection, but the conditions for that protection are often misunderstood. When markets move against the reference asset, investors can lose their entire principal. These products carry high commissions that incentivize brokers to recommend them regardless of suitability.

Variable annuities

Variable annuities are insurance products with an investment component — they are among the most complained-about products in FINRA arbitration. Common violations include recommending variable annuities to elderly investors who need liquidity, switching clients from one annuity to another to generate new commissions (twisting), misrepresenting the income rider as a guaranteed withdrawal of principal, and failing to disclose the surrender charge schedule and high annual fees.

Private placements and Regulation D offerings

Private placements are investment offerings exempt from SEC registration under Regulation D. They are sold only to accredited investors but are frequently recommended without adequate due diligence into the issuer’s financial condition. Because they are unregistered, disclosure requirements are minimal and the risk of fraud or misrepresentation is elevated. When a private placement fails, the recommending broker’s due diligence obligations — and any failure to meet them — become the central issue.

Business development companies (BDCs)

BDCs are investment funds that lend to or invest in small and mid-sized companies. Non-traded BDCs carry many of the same risks as non-traded REITs — illiquidity, high fees, and limited secondary market. They are frequently sold to retail investors seeking income, and FINRA has issued regulatory notices specifically warning about their risks. Bakhtiari & Harrison is currently investigating investor losses in non-traded BDC offerings.

All products we handle claims for

In addition to the product types above, Bakhtiari & Harrison handles FINRA arbitration claims involving losses in all of the following investment products:

Frequently asked questions

Can I recover losses from a failed investment product?

In many cases yes — if the product was unsuitably recommended, misrepresented, or sold without adequate risk disclosure by a FINRA-registered broker. The product failing does not by itself give you a claim, but the broker’s recommendation obligations are independent of the product’s performance. A securities attorney can evaluate whether the specific circumstances of your purchase give rise to a FINRA arbitration claim.

My broker says the product failed because of the market — does that mean I have no claim?

Not necessarily. Market losses alone do not support a claim, but if the product was unsuitable for your financial situation regardless of market conditions — too illiquid, too risky, too complex, carrying undisclosed fees — the broker may be liable even if market conditions contributed to the loss. The question is whether the recommendation was appropriate at the time it was made, not whether the investment outcome was foreseeable.

Should I join a class action or file an individual FINRA arbitration claim for product losses?

For losses above $100,000, individual FINRA arbitration typically produces better outcomes than class action participation. Recovery in a class is shared among all plaintiffs and often results in a fraction of actual losses. In individual arbitration, recovery is tailored to your specific losses and the specific circumstances of your recommendation. Bakhtiari & Harrison can evaluate both options and advise which is more appropriate for your situation.

How long do I have to file a product failure FINRA arbitration claim?

Under FINRA Rule 12206, claims must be filed within six years of the events giving rise to the dispute. Many product failures involve ongoing harm — distributions that stopped, redemptions that were refused, values that declined over time — and the applicable trigger date may be less obvious than it appears. Consult an attorney promptly to determine the relevant deadline for your specific claim.

Free consultation — contingency fee representation

Many times product failure claims are litigated in FINRA arbitration. A failed investment product can also harm the career of an investment professional who owes a fiduciary duty to their customers. Responsible investment professionals can take steps to work with experienced securities attorneys to assist their cusomters in recovering losses from failed investment products.

Contact Bakhtiari & Harrison at (800) 382-7969 for a free consultation. The firm represents investors in product failure FINRA arbitration claims nationwide. Cases are handled on a contingency fee basis — no recovery, no fee.