New York Securities Fraud Lawyers Blog
In March 2025, Stifel Financial was ordered by a three person FINRA Arbitration Panel to pay a family of customer investors over $132 million related to overwhelming losses caused by misrepresentations surrounding structured note investments. The landmark award included almost $80 million in punitive damages and over $25 million in legal fees. Although the Panel declined to provide a reasoned award, public reporting of the case indicates that the broker at issue did not understand and failed to disclose risks associated with the investments to the customers and also utilized unsupervised, off-channel communications in recommending the investments. If your broker or advisor recommended investments in structured notes without fully disclosing the risks and you experienced unexpected losses, you should consult an experienced securities attorney, like the ones at Malecki Law in New York City. Malecki Law has successfully represented structured note investors in the past.
Structured notes are hybrid securities that come in many different forms but typically include a debt component and derivative component. The debt or bond component represents the larger portion of the investment and provides principal protection, although investors in most structured notes risk losing their entire investment. The derivative portion of the investment is intended to amplify the return of the overall investment. This is usually achieved by allocating a portion of the investment amount to an underlying asset (i.e., stock), a group of assets, or an index. While the derivative portion of the investment is meant to increase returns, this portion can also dramatically increase losses, making structured notes appropriate for only the most sophisticated investors with high-risk tolerances.
Although structured notes can offer investors considerable returns, these investments often come with hidden risks. First and foremost, structured notes are often extremely complex products with highly customizable features. Rarely are they one size fits all. Next, structured notes are typically sold by institutions, so they experience higher rates of default risk compared to traditional bonds or equity. The variability in the terms of structured notes has also made it difficult for secondary markets to develop, meaning structured notes have low liquidity and investors should expect to hold the investments until maturity. If you’ve experienced losses in structured note investments recommended by your advisor or broker, you should speak with Malecki Law, a seasoned investor protection law firm in Downtown Manhattan.
If your financial professional recommends an investment in a structured note product, it is imperative that the financial professional fully explains the risks associated with the investment. If your financial professional is reluctant to discuss the downsides of the structured notes, it might be a red flag that the investment is riskier than they are letting on. Similarly, your financial professional should disclose to you the compensation he or she will be earning from selling you the structured notes. Regulation Best Interest requires brokers to put an investor’s best interests before their own, so your broker should not be prioritizing their own compensation over your investment objectives. If your financial professional failed to disclose risks involved with or compensation derived from structured note investments that were sold to you, consulting with successful FINRA Arbitration Lawyers, like the ones at Malecki Law in New York could give you possible avenues for recovery.
Often times, structured note investments are extraordinarily complex and exceedingly difficult for the average investor to understand. These investments usually include heightened risks and a chance that you lose your entire investment. As such, structured notes are rarely, if ever, appropriate for conservative or moderate-leaning investors. If your broker or advisor sold you a structured note investment that you do not understand or that has lost considerable value, it is imperative that you speak with an experienced investment misconduct lawyer, like the ones at Malecki Law in Lower Manhattan.