Investors in Equity Linked Structured Products Tied to Apple Could Recover Losses

by InvestorLawyers on February 15, 2013

in Arbitration,FINRA,SEC,Securities Fraud,Suitability

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in Equity Linked Structured Products which were tied to the Apple stock price. Apple stock has suffered a significant decline since last year, falling from more than $700 per share to less than $440 per share. While many Apple shareholders suffered losses as a result of this price decline, Equity Linked Structured Products, or ELSPs, that were tied to Apple’s stock price also suffered significant losses. Essentially, ELSPs are bonds that have a feature that allows them to be converted into other companies’ stocks.

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Features of ELSPs include high interest payments for a year or less. If the stock price of the company that the ELSPs are tied to remains close to the price of the stock at the time the bonds were issued, or increases, ELSP investors will get their money back when the investment comes due. However, if the stock price suffers a decline of more than 20 percent, the ELSPs can become shares of the stock — in this case, Apple — and the investor has no choice but to hold the investment until maturity.

Securities arbitration lawyers say that when Apple’s stock price increased substantially in 2012, full-service brokerage firms like Morgan Stanley, JPMorgan Chase and Barclays sold more than $722 million in ELSPs. In 2012, around 450 of the new structured products issued were tied to Apple, 75 percent of which suffered an estimated 15 percent decline in just one week. Most of these products are now underwater. In addition, many believe that investment banks were using ELSPs as an inexpensive hedging strategy against Apple’s stock price and benefited from these investments while investors were losing.

Many investors have come to stock fraud lawyers asserting that they were unaware of the actual risks associated with ELSPs. In many cases, full-service brokerage firms led investors to believe that ELSPs were low-risk, safe investments. As a result, many investors were recommended an investment that was unsuitable for them given their risk tolerances and investment objectives.

If you suffered significant losses as a result of your investment in Equity Linked Structured Products tied to Apple’s stock price at the unsuitable recommendation of a full-service brokerage firm, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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