H&R BLOCK FINANCIAL ADVISORS (AMERIPRISE ADVISOR SERVICES) FINED BY FINRA FOR REVERSE CONVERTIBLE SALES

H&R Block Financial Advisors, now Ameriprise Advisory Services, has been fined $200,000.00 by the Financial Regulatory Industry Authority (FINRA) for failing to establish a proper supervisory system to monitor reverse convertible note sales to clients. FINRA said that between January 2004 and December 2007, H&R Block sold reverse convertibles to clients without keeping an eye on possible over-concentrations of reverse convertibles in clients' accounts. FINRA added that H&R Block did monitor unsuitable investments through an automated surveillance system, but no system was in place to keep track of reverse convertible transactions, which caused them to miss signs of perilous levels of reverse convertibles in client accounts. Moreover, FINRA said that the firm had failed to provide guidance to its supervisors concerning suitability as it relates to their agents' recommendations of reverse convertibles to clients.

Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.

In connection with FINRA's action, H&R Block broker Andrew MacGill was suspended for 15 days and ordered to pay $10,000.00 in fines and $2,023 in disgorgement for making unsuitable reverse convertible sales to a retired couple. Mr. MacGill suggested that the couple put up to 40% of the total liquid net worth in reverse convertibles. H&R Block was ordered to pay $75,000.00 in restitution for the losses incurred. Both Mr. MacGill and H&R block consented to FINRA's findings.

Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

BROKERS NATIONWIDE RESTART PUSH FOR INVESTORS TO BUY REVERSE CONVERTIBLES

Investors are once again being pushed into structured products such as reverse convertibles by brokers who tout sturdy profits and very little downside risk. However, representatives are unable to account for why products like reverse convertibles have been unable to deliver stellar returns without posing a significant risk to investors' capital. Reason being is that more than most brokers do not understand how reverse convertibles work and are only selling them because of the hefty commission.

Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.

One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.

Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SECURITIES AND EXCHANGE COMMISSION WARNS REVERSE CONVERTIBLE INVESTORS NATIONWIDE

The Securities and Exchange Commission (SEC) has recently reported that broker-dealers are conducting sales of risky structured products, which ultimately hurt their clients. A sweep of more than 10 broker-dealers revealed that firms are steering clients into complex investments such as reverse convertibles that are not suitable for their portfolios. In many cases, the brokers did not disclose the risks associated with investing in reverse convertibles, misrepresented their values on client statements, and charged excessively high transaction fees. The SEC is recommending that brokers disclose the true nature of reverse convertibles to their clients, establish a supervisory system to avoid potential abuses, and perform adequate training of their sales representatives. Although this report touches upon faulty sales practices of risky products, it does not address what investors should really be concerned about.

Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.

Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

PUERTO RICO INVESTORS BEWARE OF BANCO SANTANDER REVERSE CONVERTIBLES

Banco Santander, a large bank based in Spain, has recently agreed to pay $2 million to end a dispute between its brokerage group in Puerto Rico and retail clients for sales of structured products known as reverse convertibles. This comes as no surprise since many aggrieved Banco Santander investors in Puerto Rico have filed claims to recover losses due to the product's disastrous performance. The Financial Industry Regulatory Authority (FINRA) has responded by issuing several notices to members containing guidelines for reverse convertible sales, which identify the level of sophistication an investor should possess and outline the analyses brokerage firms should take prior to offering and selling the product to its clients. FINRA is also performing "sweeps" of large Wall Street firms to investigate how they advertise reverse convertibles, while the Securities and Exchange Commission is investigating whether their risks are being disclosed properly.

Reverse convertibles, which are a type of structured product, are interest bearing notes in which principal repayment is linked to the performance of a reference asset, often a stock, a basket of stocks, or an index. The reference asset is generally unrelated to the issuer of the note. At maturity if the value of the reference asset has fallen below a certain level, the investor may receive less than a full return of principal. The diminished principal repayment could be in the form of shares of stock put to the investor or their cash equivalent. Reverse convertibles expose investors not only to the risks traditionally associated with fixed income products, such as issuer risk, but also to the risks of a decline in value in the underlying reference asset, which can lead to loss of principal. Reverse convertibles tend to have limited liquidity and complex pay-out structures that can make it difficult for registered representatives and their customers to accurately assess their risks, costs, and potential benefits.

Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA FINES WELLS FARGO $2 MILLION FOR REVERSE CONVERTIBLE SALES TO SENIORS

The Financial Regulatory Industry Authority (FINRA) has charge former Wells Fargo registered representative Alfred Chi Chen for recommending and selling reverse convertibles and making unauthorized trades in deceased customer accounts. The reverse convertible sales involved 21 customers and 172 accounts. 71% account holders were over 80 years old, and more than half of the accounts had between 50 and 90% of capital in reverse convertibles. Mr. Chen generated $1 million in commission from the sales, which contributed to investors' losses. As a result, FINRA fined Wells Fargo $2 million and ordered that customers receive restitution for unsuitable sales of reverse convertibles and other misconduct, which Wells Fargo ultimately consented to.

Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.

Most investor are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have average 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce atpearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

REVERSE CONVERTIBLES POSE A LEGITIMATE RISK FOR INVESTORS NATIONWIDE

Several warnings have been issued over the years by sources such as the Wall Street Journal regarding the risk of investing in reverse convertibles. These risks have now become a reality for many investors who have allocations of the product in their portfolio.

The surge in demand for reverse convertibles began when Wall Street marketed a product with yields between 7 and 25% and very little downside risk. Sales began to soar while demand for fixed income products dropped due to the decline in conventional interest bearing product yields. Small investors purchased $8.5 billion in reverse convertible in 2007 alone. Some of the firms that have offered reverse convertibles include Morgan Stanley, Barclays, Wells Fargo, and ABM AMro Holding NV.

Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price. Also, investors may risk capital if they try to sell their reverse convertible prior to its maturity.

The Financial Industry Regulatory Authority (FINRA) has sent inquiries to brokerage firms regarding monitoring reverse convertible sales and marketing practices. Still, firms continue to hold out reverse convertibles as safe investments. Some firms even list reverse convertibles under CD alternatives. The NASD has suggested that only investors who are approved to trade options be allowed to purchase reverse convertible, but they pose a risk for even the most sophisticated investors.

Most investor are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have average 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.