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Home > Blog > SEC Places Merrill Lynch in its Crosshairs over Sales of Structured Notes

SEC Places Merrill Lynch in its Crosshairs over Sales of Structured Notes

A recent article in The Wall Street Journal (“SEC Readies Case Against Merrill Lynch Over Notes That Lost 95%”) stated that the Securities and Exchange Commission is preparing a civil enforcement case against Merrill Lynch over a structured note investment that fell as much as 95% in value and was marketed in a way that one of the firm’s financial advisers called “borderline crooked.”

“The probe involves a product called Strategic Return Notes that Merrill sold over a number of months in 2010, raising about $150 million. Linked to a Merrill Lynch index tracking the volatility of the S&P 500 stock index, the five-year notes lost value rapidly after they were issued, as market volatility fell and the cost of buying the options upon which the notes were based rose sharply.”

Structured notes are extremely complex securities that are custom-built by banks out of options and other derivatives and are often sold to retail investors.

Wall Street investment banks sell an estimated $40 billion to $50 billion of structured notes each year and they rank among the most common types of securities in arbitration claims filed with the Financial Industry Regulatory Authority (FINRA).

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Merrill Lynch & Co., Inc., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

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