Investment Product Failure Attorneys – Bakhtiari & Harrison

Written and reviewed by

Ryan Bakhtiari, Partner — Bakhtiari & Harrison

Admitted: CA | NY | TX | DC | Multiple Federal Courts · Super Lawyers 2005–2026 · Former PIABA President · Former FINRA NAMC Chairman · Last reviewed: April 2026

Bakhtiari & Harrison represents investors in claims against brokerage firms and financial advisers involving the product failure of securities products — including non-traded REITs, structured notes, variable annuities, private placements, hedge funds, leveraged ETFs, and the full range of complex investment products that Wall Street markets to retail and institutional investors. Over four decades, the firm has recovered more than $250 million for clients. Ryan Bakhtiari served as Chairman of the FINRA National Arbitration and Mediation Committee and as President of PIABA. Partner David Harrison is a former Morgan Stanley in-house counsel who began his career as a Series 7-licensed registered representative at Shearson Lehman Brothers. Investor cases are handled on a contingency fee basis — no recovery, no fee.

Why investment products fail investors

For decades, brokerage firms have focused their marketing and sales efforts on proprietary and third-party securities products — non-traded REITs, structured notes, variable annuities, private placements, alternative investments, and other complex instruments. These products are typically highly commissioned, generating far more revenue for the selling firm than comparable traditional investments. They are marketed to investors as safe alternatives to stocks and bonds, as income-generating solutions, or as exclusive opportunities unavailable in public markets.

The reality is often different. Many of these products are baskets of risky financial instruments that most investors would never purchase if the risks and fees were clearly disclosed. When they fail — through product design flaws, market events, or outright fraud — the losses can be catastrophic. And unlike exchange-listed securities, many of these products are illiquid, meaning investors cannot exit even when they recognize a problem.

Product failure cases require the most experienced counsel available. They involve multiple layers of potential liability — the issuer, the distributor, the selling broker-dealer, the supervising firm — and frequently overlap with regulatory investigations, class action litigation, and parallel FINRA proceedings. Bakhtiari & Harrison has handled product failure cases at every level of complexity and against every major broker-dealer in the country.

Investment products the firm handles

Bakhtiari & Harrison represents investors in claims involving a wide range of securities products. Select a product category for specific information:

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:

FINRA arbitration vs. class action — choosing the right path

When an investment product fails, investors typically face a choice between two primary recovery paths: individual FINRA arbitration and participation in a securities class action lawsuit. The right choice depends on the size of the loss, the nature of the claim, and the investor’s specific circumstances.

Individual FINRA arbitration: Best for investors with significant individual losses — typically $100,000 or more. The full amount of the individual investor’s loss is recoverable, including punitive damages in appropriate cases. FINRA arbitration is faster than class action litigation (typically 12 to 18 months vs. several years), and the investor controls the case rather than being a passive class member.
Securities class action: Best for investors with smaller individual losses where individual arbitration is not economically practical. The investor participates as a class member and shares in any recovery. Class action settlements for failed products can be significant, but individual recoveries may be a fraction of actual losses.

Bakhtiari & Harrison evaluates both options for every product failure client and advises on which path — or combination of paths — is most likely to maximize recovery. The firm has served as lead class action counsel in both federal and state court, in addition to its individual FINRA arbitration practice.

The importance of experienced product failure counsel

Product failure cases involve complex financial instruments, multiple potential defendants, and frequently overlapping regulatory and legal proceedings. An attorney who lacks direct experience with the specific product at issue — its structure, its marketing materials, its regulatory history — will be at a significant disadvantage. Bakhtiari & Harrison has handled claims involving virtually every major product category sold to retail investors over the past four decades.

Read more about the importance of selection of experienced counsel in product failure cases.

Frequently asked questions — product failure

How do I know if my investment product failure gives rise to a claim?

Not every investment loss gives rise to a legal claim — markets go up and down, and losses alone are not actionable. A claim arises when the product was recommended in violation of suitability standards (FINRA Rule 2111 or Regulation Best Interest), when material risks or fees were not adequately disclosed, or when the product itself was fraudulent. Bakhtiari & Harrison evaluates all potential product failure claims at no charge. If the recommendation was unsuitable for your financial situation, or if material information was withheld, you may have a viable FINRA arbitration claim.

Can I file a FINRA claim and also participate in a class action?

In some cases, yes — depending on the specific product, the claim type, and the status of any class action proceedings. Filing a FINRA arbitration claim may require opting out of a class action. Bakhtiari & Harrison advises each client on the interaction between individual FINRA claims and class action participation before any filing.

My investment product was marketed as conservative — does that matter?

Yes, significantly. If a product was marketed to you as conservative, income-generating, or capital-protected — and the actual product was something very different — that misrepresentation is directly actionable. The gap between how a product was described and what it actually was is often the core of a product failure claim. Keep all marketing materials, prospectuses, and communications you received from your adviser.

The brokerage firm says the losses were caused by market conditions — is that a defense?

It is a defense brokerage firms frequently raise, but it is not determinative. The legal question is not whether the market declined — it is whether the product was suitable for you given your stated risk tolerance, investment objectives, and financial situation, and whether the risks were adequately disclosed. A product that loses 70% of its value when the broad market declines 15% is not suitable for an investor who was told it was a conservative income alternative.

Contact a product failure attorney — free consultation

Contact Bakhtiari & Harrison for a free, confidential consultation. Our FINRA attorneys review every potential case at no charge.

Investor cases are handled on a contingency fee basis — no recovery, no fee.

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