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Defective Securities Products

From Jenice's interview for the Masters of the Courtroom series on
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Some securities products should never have been recommended or sold to most investors or sometimes should not have been sold to any investor. Investors ensnarled in defective financial products ought to consider their legal options in consultation with Malecki Law’s top defective securities product attorneys.

Like a defective air-bag or failure to truthfully describe an addictive and harmful product like a cigarette or an opioid, brokerage firms sometimes create defective financial products and/or misrepresent the products and fail to disclose the risks associated with those “proprietary products,” i.e., products created by the brokerage firms.

You should not have to be a defective securities product lawyer to understand these complex structures, which often have little track record and history. Many times, the broker does not even understand the product themselves, but have been pushed by a brokerage firm to sell it – sometimes also getting misinformation, leaving the investor holding the bag. Moreover, some of these products are only appropriate for the most sophisticated investors.

Many times, these complex products are designed to address specific needs for large, sophisticated investment managers, day traders and other financial professionals. This means that products like these should rarely, if ever, be sold to average investors with more conservative needs or goals. Malecki Law defective securities product lawyers are here to navigate these treacherous waters.

Malecki Law is investigating products like this, such as GPB Capital Holdings, Northstar Healthcare Income REIT, Steepeners Structured Products, UBS Yield Enhancement Strategy, Horizon Private Equity, GWG Holdings L Bonds.

Generic examples of products to keep an eye out for include:

  • Leveraged ETFs
    • These products are designed to trade like stocks but at multiples of their target index. In other words, a Triple-Leveraged ETF that follows the S&P 500 would be designed to return three times the return on an investment in the S&P 500 index itself, but also incur three times the loss if the S&P 500 went down. These products are designed to be day-traded, not held long term. Because of the way the products are structured and readjusted, long term investments in these products will only return a loss in the long-term.

    These are too often sold without proper risk disclosures as ways to recoup losses or magnify gains. Unfortunately, these investments tend to do neither, instead just amplifying losses.

  • Non-Traded Private Placements
    • These are highly illiquid, oftentimes very speculative investments. This category includes Real Estate Investment Trusts (REITs) and Oil and Natural Gas Limited Partnerships. Once the investment is made, it can be exceedingly difficult for the investor to cash out of the investment without paying a large penalty or incurring a substantial loss.

    Sold as safe, high income-generating investments, these appeal to conservative retirees who are living on a fixed income. However, the inherent risks and inability to freely sell are often hidden from investors until it is too late.

  • Commodity Futures
    • For a knowledgeable, sophisticated investor, speculating on commodity prices can be a way to make substantial profits. However, for the average investor, making an informed decision can be nearly impossible. Commodities are an incredibly unique category of investments. Even investors who have considerable experience in stocks and bonds can be overwhelmed by the commodities market. The average, unsophisticated investor should not venture into these products.

    Investors may believe that they are being safe by buying goods. However, what they are actually doing is speculating on the price of that good at some point in the future, which can be very risky.

  • Tenant in Common Investments
    • Touted for the tax benefits and steady income stream they offer; TICs have become a booming industry. However, investors may not appreciate the risks that stem from them. The investor also has little control over the way the property is managed. These are long term, illiquid securities that cannot be easily sold and can lose much of their value.

    Brokers may only highlight the benefits of a TIC without properly advising a client of the risks. Such investors can find themselves holding a losing investment that they are unable to sell.

  • Collateralized Debt Obligations, Collateralized Mortgage Obligations, and Mortgage-Backed Securities
    • CDOs, CMOs, and MBSs are largely credited with causing the problems that led to the Great Recession of 2008. These investments were sold as safe, creditworthy products, despite being just the opposite. Companies bundle bad loans together with some good loans, and through creative accounting, were able to obtain good credit ratings for them. They then sold pieces of these “bundles” to investors, who eventually realized huge losses when the bad loans were defaulted on.

Like the other products on this list, these too were sold by brokers who minimized the risks and left their clients “holding the bag” when the investments failed.

We deal with product failure issues in mutual funds, preferred securities, notes bonds, annuities, hedge funds, private placements, REITs, TICs, CDOs, CMOs, MBSs, and other structured products. FINRA has stringent rules relating to how these products are sold.

Malecki Law Defective securities products attorneys are skilled at aggressively fighting the largest brokerage firms, represented by the largest law firms, in the country. We have sued UBS, Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Citibank Wealth Management, JP Morgan, Deutsche Bank, Cetera, Edward Jones, Raymond James, RBC, Ameriprise, LPL, Prudential Securities, MetLife Securities and many others.

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Testimonials From Former Clients
I highly recommend Jenice and her team at Malecki Law. I had a challenging, and lengthly case. Jenice was professional, very knowledgeable, and a pleasure to work with. She managed to make the process far less stressful during a very difficult time. They care about their clients, and it definitely shows. Mario
Jenice is truly a miracle worker and one of the top securities lawyers. She handled a very difficult case for us, displaying her legal knowledge, intelligence, and savviness throughout the process. I cannot recommend her enough. The quality of work from her team rivals that of corporate law firms. She was always available, extremely professional, and made sure to know all the details of the case. We were very fortunate to have been referred to Jenice and highly recommend her for any securities related legal issues. Nathan A.
An excellent professional who represented us in trial regarding a bank fraud, an unexpected and difficult time. A professional that worked hard, persevering and who stood toe to toe against firms that had a team of excellent lawyers backing them up. Her unflinching determination really stands out, it makes you feel you have someone who really cares about trying to recover what you lost from the people that wronged you. Salomon Levi
It is difficult to thank you in words when gratitude comes from the heart, so I will try to link feelings with writing. It is essential for us to mention your excellence as a professional, your aptitude on legal fields, and your unavoidable persistence. All of these virtues that elevate the profession you exercise in such an admirable way, go hand in hand with your sense of ethics, your human warmth and the transparency in your actions. To sum up, thank you for being a listening ear and for having the right word while transmitting information about the legal process. Having you as our representative during such an adverse situation was a privilege and enough reason for our eternal gratitude. Angeles Aparain
To say that my securities litigation was complex would be a severe understatement. With multiple parties involved and spanning many years, trying to understand the issues was daunting to say the least. Jenice and her team broke down the transactions by segment and by party uncovering every hidden expense. In the end, I was more than happy and could not thank Jenice and her team enough. I would not hesitate to recommend Jenice to anyone. She is highly professional, incredibly knowledgeable, well connected to industry experts, has a tireless work ethic and is so pleasant and easy to communicate with. Five stars for sure! Andrew Loughrane