amansky & Associates LLC announces an investigation into claims by investors and brokerage account customers who purchased equity-linked bonds or structured notes linked to the stock price of Apple Inc., and wish to recover their losses.¹ Zamansky believes that structured notes are complicated, speculative investments that may be unsuitable for retirees, conservative or moderate investors.
During 2012, according to Bloomberg, Wall Street issued approximately $1.66 billion structured notes or bonds linked to the price of Apple stock. The largest issuers were JPMorgan Chase, Morgan Stanley, Barclays and UBS Financial Services who largely sold to investors when Apple was trading at or above $650 per share.² The structured products sold by these firms to their brokerage customers bore names such³ as:
o Reverse Exchangeable Notes
o Contingent Interest Notes
o Trigger Notes
o Buffered Equity Notes
o Auto-Callable Notes,
o STEP Income Securities
o Strategic Accelerated Redemption Securities (STARs)
o Return Optimization Securities
o Yield Optimization Notes
With Apple’s stock price falling to below $450 per share, investors with these structured notes are facing losses of 30%, according to Bloomberg. According to Zamansky, investors will see their notes convert into volatile Apple stock -- “essentially, they sold Apple ‘high’ at $650 per share, and are buying it ‘low’ at $450 per share.” For many investors, this risk of a 30% or more loss was not only too great for them, but was never fully explained by their broker, Zamansky asserts.
“Apple structured notes are unsuitable for investors who wanted ‘safe’ or ‘conservative’ returns,” says Zamansky. The notes must be held to maturity, and cannot be sold if the market moves against them. Zamansky believes that the Apple notes have a skewed risk/reward ratio – the upside to investors is always capped, while the potential downside is enormous. The notes are the functional equivalent of shorting “naked” put options, he says, a strategy considered so risky that brokerage firms are required to qualify and approve investors before allowing trades.
Investors may have a claim if their financial advisor misrepresented the risks of Apple structured notes, or represented that it was a safe bond that paid an attractive interest rate for one year, according to Zamansky. Investors may have a claim if their financial advisor represented that Apple was safe due to its growth over the past few years, according to Zamansky.
According to Jason Zweig of the WSJ (4) , the “deck is stacked against anyone who bought these products.” Starting back on August 20, 2012, banks issued 76 U.S. notes linked to Apple stock at a time when the company was valued at $650 per share or more, according to data compiled by Bloomberg. Zweig reports that JPMorgan Chase & Co., the largest issuer of Apple-linked notes, sold $65.5 million of one-year auto-callable notes which have traded below par since they were issued. Zweig states that the Apple-linked notes “gave firms a cheap way of hedging or betting that Apple’s stock would go down.”
For more information, see Zamansky’s blog, Falling Apple’s Price Causes Collateral Damage.
What Apple Structured Note Holders Can Do
If you would like to discuss your legal rights and how you might recover your losses from Apple structured notes, you may, without obligation or cost to you, email jake(at)zamansky(dot)com or call the law firm at (212) 742-1414.
About Zamansky & Associates LLC
Zamansky & Associates LLC is one of the leading law firms specializing in securities fraud and financial services arbitration and class action litigation. We represent both individual and institutional investors. Our practice is nationally recognized for our ability to aggressively prosecute cases and recover losses.
To learn more about Zamansky, please visit our website, http://www.zamansky.com.
¹ Bloomberg, Dec. 14, 2012, Apple Stock Slide Endangers $241 Million of Structured Notes, http://www.bloomberg.com/news/2012-12-14/apple-stock-slide-endangers-241-million-of-structured-notes.html
² Wall Street Journal, Jan. 26, 2012, Zweig, Jason, How Apple’s Fall Bit Bondholders, Too (subscription required).
³ Review of the S.E.C.’s Edgar database.
(4) Wall Street Journal, Jan. 26, 2012, supra.
Zamansky & Associates, LLC
50 Broadway - 32nd Floor
New York, NY 10004
Jake Zamansky, 212-742-1414