The Law Offices of Robert Wayne Pearce, P.A. has had many cases involving these complex products made of a combination of securities, including notes (IOUs) linked to other assets such as a stock or basket of stocks or derivatives such as options which may be linked to other assets. According to Attorney Pearce, they have been misrepresented by many brokers as fixed income investments to lull retirees seeking to supplement their retirement income to invest in them. Many investors seeking safe investments were hooked by the false and misleading words “principal protected” in the names of the products, such as the Lehman Brothers’ “100% Principal Protected Notes” which, in reality, were no more than unsecured obligations of a company now in bankruptcy and nearly worthless.
Representing clients throughout Florida and nationwide.
Note-linked structured products were developed in the 1980s and sold primarily to institutional investors in the 1990s. In recent years, broker-dealers have increasingly targeted general retail investors. Although many of the note-linked products sold to retail investors are based upon “blue chip” and “household-name” stocks that comprise the S&P 500 or the NASDAQ -100 indexes, firm sales practices have created concerns about the manner in which the products are marketed to investors. Over $100 billion worth of note-linked structured products have been sold in recent years, often to senior investors looking to earn more interest while protecting their principal. In addition, they tend to pay higher commissions to brokers than conventional fixed income products do.
What Investors Should Understand Before Buying Note-Linked Structured Products
Note-linked structured products involve risk and complexity, and investors must understand how they work before buying. At our securities litigation firm, we have seen many cases where clients invested without realizing that a structured note = unsecured debt + derivative payoff rather than a protected bond, and this misunderstanding can lead to substantial losses.
These products typically combine a debt obligation from a bank with a payout linked to an underlying reference asset such as a stock index or equity basket. Because returns are formula-based and not tied to a pool of conventional assets like mutual funds, investors often face liquidity risk and issuer credit risk if they need to sell before maturity.
Investors should also know that there is often no broad secondary market for structured notes, and fees and tax treatment can reduce net returns compared with more traditional investments. Clarifying these financial mechanics helps protect clients from misrepresentation and aligns investing decisions with individual risk tolerance.
FREE INITIAL CONSULTATION WITH “PRINCIPAL PROTECTED” NOTE INVESTMENT DISPUTE ATTORNEYS
The Law Offices of Robert Wayne Pearce, P.A. understands what is at stake in Principal Protected Note investment law matters and constantly strives to secure the most favorable possible result. Attorney Pearce provides a complete review of your case and fully explains your legal options. The firm works to ensure that you have all of the information necessary to make a sound decision before any action is taken in your case.
For dedicated representation by a law firm with substantial experience in all kinds of securities, commodities and investment disputes, contact the firm by telephone at 833-300-6983 or toll free at 800-732-2889 or via e-mail.
