Defective Investment Products

In recent years, more and more lawsuits have involved complex and speculative investment products that were inappropriately sold and marketed to investors by several brokerage firms and registered investment advisors. In many instances, these products, which were meant for sophisticated, speculative and high net-worth investors, were marketed and sold as low-risk, conservative structured investment products to investors who were seeking income with capital preservation. However, in reality, the investments were subject to a significant amount of risk, including the risk of complete loss of the entire investment. Recently, numerous FINRA enforcement actions have arisen due to unfair sales practices regarding these products. Many investors have been significantly damaged as a result of the inappropriate marketing and selling of these investment products.

The investment fraud attorneys at Lax & Neville have experience investigating the following investment products:

  • Closed-End Funds
  • Delaware Statutory Trust Investments (DSTs)
  • Equity-Linked Notes (ELNs)
  • Exchange Traded Funds (ETFs) and Leveraged Exchange-Traded Funds (ETFs)
  • Like-Kind Exchanges (1031 Exchanges)
  • Managed Futures Funds
  • Oil and Gas Investments
  • Private Placements (Reg D)
  • Real Estate Investment Trusts (REITs)
  • Reverse Convertible Notes
  • Tenant-In-Common Investments (TICs)
  • Variable Annuities
  • Penny Stocks
  • Municipal Bond Arbitrage
  • Promissory Notes
  • Structured Products (CDO, CMOs, MBS)
  • UBS Puerto Rico Bond Funds
  • Equity-Indexed Annuities

Often times, your broker or investment advisor will recommend these products to you because they receive a higher commission on the sale of these products as opposed to selling more traditional investments. When a broker or investment advisor makes a recommendation based on the size of their potential commission, rather than upon careful consideration of your investment goals and risk profile, they may have breached a fiduciary duty or failed to satisfy their suitability requirements. Additionally, many of these products are highly illiquid and may not be suitable for investors approaching retirement, who may need access to their funds. For some of these investments, investors will not know how much they have lost because the value of the security is not readily attainable. Finally, in some cases, these investments will be the sole product promoted by a financial firm. In these cases, your broker may over-concentrate your account in one risky investment. Furthermore, this relationship carries a potential conflict of interest with the investment promoter. That conflict may result in your broker or investment advisor’s failure to perform their own due diligence, or worse, blindly rely on the investment promoters due diligence report.

Lax & Neville LLP has been successful in recovering significant awards and settlements in cases involving deficient investment products, including a long line of product problem cases generated by Wall Street firms, such as, cases involving auction rate securities, Regions Morgan Keegan Select bond funds, Lehman Brothers Principal Protected Notes, Citigroup MAT Funds and the Aravali Fund.

If you suffered damages through investing in any of these products, please contact Lax & Neville LLP, (212) 696-1999 for a consultation.

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