Investors Lose Big After Being Sold ‘Steepeners’

September 20, 2019 Author: Daniel
leveraged steepener trades

Flatter Yield Curve Results in Significant Losses For Some Investors

Investors are seeking recovery for losses sustained in leveraged steepener trades.  Steepeners are complex investment strategies. Investopedia describes it as “a strategy that uses derivatives to benefit from escalating yield differences that occur as a result of increases in the yield curve between two Treasury bonds of different maturities.” Curve steepener trades are generally unsuitable for the average investor as they require an enhanced understanding of yield curve, interest rates, and yield spread.

Levin Law is investigating brokerage firms that recommended steepener strategies to their clients.  It is believed that steepeners and other structured products were aggressively marketed to unsuspecting investors without disclosing all material risks.  Many investors were not properly informed of the risk involved if the U.S. Yield Curve remained flat or even inverted. A flatter yield curve means that investors holding steepener products will not receive interest and will have to face selling at a significant loss.

If you suffered losses as a result of a steepener strategy or investment in another complex structured product, you might be entitled to recovery through FINRA arbitration.   Your financial advisor has a duty to disclose the risk involved in any investment strategy. If you were sold a steepener but not made aware of the risk involved with a flattened yield curve, you might be able to recover your losses.  Finally, stock brokerage firms owe a duty to supervise their brokers in making suitable recommendations and upholding their fiduciary duty.

Brokers across the country recommended to their retail clients a variety of structured products, which caused investors to suffer massive and unacceptable losses, including but not limited to the following:

  1. HSBC Callable Leveraged Steepener Notes
  2. Merrill Lynch Strategic Return Notes
  3. BNP PARIBAS Structured Notes
  4. JP Morgan Chase Return Optimization Notes
  5. JP Morgan Target Term Securities
  6. Credit Suisse Structured NotesMarket-linked CDs
  7. Callable Quarterly CMS Spread-Linked Notes
  8. Structured CDs
  9. Leverage Callable CMS Curve Linked Notes
  10. Leverage Callable CMS Curve Linked Notes
  11. Callable Interest Rate Spread CDs
  12. Callable CMS Spread Notes

The Financial Industry Regulatory Authority (“FINRA”), in Regulatory Notice 12-03, cautioned brokerage firms to avoid misrepresenting the risks of steepeners, which typically offer a relatively high teaser coupon rate for the first year, after which they offer variable rates determined by the steepness of the yield curve.  Thus, as the yield curve flattens, the steepener notes pay significantly less yield.

If you have experienced losses in a steepener product with any financial advisor or brokerage firm, including but not limited to HSBC, Merrill Lynch, JP Morgan, Credit Suisse, and others, please contact us for a free case evaluation, you need to act fast.  Let the experienced attorneys at Levin Law fight for you.  Our attorneys have recovered tens of millions for victims of investment fraud and stockbroker misconduct through securities litigation, class actions, and FINRA arbitration.   Call Levin Law today at (305) 402-9050 for a free, no-obligation consultation.

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