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Losses In Oil Linked Structured Notes May Give Rise To Arbitration Claims

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations of Oil Linked Structured Notes (Structured Notes) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation.

15.11.10 oil wells

A structured note is a debt obligation from an investment bank that uses derivatives to create the desired exposure to one or more investments. Oil linked structured notes were created in order to protect investors against a drop in the price of crude oil. However, since oil prices have suffered substantial losses in the past two (2) years (this year being a six-year low in price) the Structured Notes have dropped in value.

According to Bloomberg Business News (Bloomberg), of the $437.1 million in Structured Notes that have matured this year, 44%, or $192.3 million has dissipated. Bloomberg analyzed the SEC filings of 39 Structured Notes and found that 36 of the 39 Structured notes protected against a certain percentage of losses, typically 10-20%. After the price of oil dropped more than 60% those protections were quickly overwhelmed. Thus, investors who purchased the notes as a hedge against other investments linked to the price of crude oil (or physical crude oil) may not have benefited as much as they reasonably expected from the hedge provided by the Sructured Notes.

Barclays Plc was one of the biggest issuers of the Structured Notes, in April, 2014 it issued $104.6 million of 14 month Structured Notes which went down approximately 42% in value. When the Structured Notes were issued oil was valued at $103.74 a barrel, when the Structured Notes matured in June of 2015 they were worth $60, nearly a 58% drop in value. Investors reportedly received a return of $60.9 million.

Some of the Structured Notes include:

Accelerated Return Notes;

Strategic Return Notes;

Capped Leverage Return Notes;

Target Term Securities;

Market Linked Notes; E-Tracs;

Return Optimization Notes;

Auto-Callable Securities;

Performance Leveraged Upside Securities (PLUS);

and Equity Linked Securities (ELKs).

If you believe you may have a claim concerning Structured Notes or other investments linked to energy prices, you may wish to consult an attorney to find out more about your legal rights and options. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or for a no-cost, confidential consultation.

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