Malecki Law Announces Investigation of Reverse Convertible Notes

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law’s history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.

Malecki Law is currently investigating the potential for recovery of losses from reverse convertible securities. Reverse convertible notes can be defined as complex, short-term bonds. At the end of one year, the owner receives either a 100% return on their investment or a predetermined amount of stock should the value of the note drop by a set figure (typically 70-80%). Their high-interest rates (recently set at as much as 13%) make them an alluring prospect for quick and significant gains.

Such notes are widely discussed in the finance industry today, both because of their popularity ($6.76 billion worth of reverse convertibles were sold in the U.S. in 2010) and because of growing concerns that the industry is selling such notes to unsuitable investors, and failing to supervise investments properly once funds have been transferred. RCNs have thus received increased regulatory attention from FINRA and other regulators.

In July of 2011 the SEC filed a report targeting several areas in which an array of brokerage firms were failing to provide investors with necessary information, to the unwarranted risk and detriment of investment funds. These areas included but are not limited to: a failure to ensure that the sales were suitable, a lack of training procedures, and a failure to properly supervise secondary market activity.

In conjunction with the SEC’s findings, FINRA Notice to Members 11-25 concisely states that due diligence is required from brokers when it comes to their own understanding of the securities they are selling, particularly material as potentially precarious an RCN. When a broker has failed to become properly educated in the securities being sold, or is willfully misrepresenting such products, legal recourse can be taken.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options. If you or a family member invested in reverse convertible notes, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

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