Financial Regulators in 10 states including Florida, Texas, New Hampshire and Missouri, are examining whether brokers improperly sold structured notes; securities that package debt with derivatives which are typically offered to individual investors.
This financial product was marketed to customers as a solid and secure investment. They are called a ‘100 percent principal protected absolute return barrier notes,’ complex debt instruments whose pay-offs are linked to the performance of reference stocks, indices, commodity prices, interest rates, or exchange rates.
The regulators are investigating whether investors received adequate disclosure of the risks associated with this product from their financial advisers. Investors in these securities have suffered billions of dollars in losses since the financial meltdown in 2008.
Brokerage firms often issued these securities; many investors Lehman Brothers Principal Protected Notes marketed by Lehman Brothers, Citigroup, Merrill Lynch, UBS and Wachovia. Those notes are now virtually worthless. FINRA arbitration is a dispute resolution process offered by the Financial Industry Regulatory Authority (FINRA) to resolve conflicts between investors, brokerage firms, and individual brokers. Unlike traditional court litigation, arbitration is typically faster and less formal. In this process, an impartial arbitrator or a panel of arbitrators listens to both parties’ arguments and evidence before making a binding decision. This method is often chosen for its efficiency and lower costs, making it an attractive option for investors seeking resolution without the complexities of a court trial. The arbitration process is governed by specific rules and procedures, ensuring a fair and equitable hearing. While the decision is final and generally cannot be appealed, parties can still settle the dispute before the arbitration concludes. FINRA arbitration serves as a crucial mechanism in maintaining market integrity and protecting investors’ rights.