“Steepeners” are complex, structured investment products. They are typically longer-term notes and certificates of deposit that can span 10 to 30 years. At the outset, these investments pay interest at favorable fixed rates. However, these “teaser” rates soon give way to variable rates calculated by reference to the slope of the yield curve, which reflects the difference between short and long term interest rates.
Firms and brokers that sell Steepeners and other complex products to retail investors have been under increasing scrutiny from regulators in recent years. Last year, for example, Investors Capital Corp., a Cetera subsidiary, agreed to pay $1.1 million to settle FINRA charges that it recommended unsuitable short-term trades in steepener notes and other complex products. A financial advisor with Investors Capital Corporation was subsequently fined and suspended for his role in the unsuitable sales. The advisor, Robert Estevez, reportedly recommended the investments to 19 customers as part of a short term and active trading strategy.
More recently, FINRA fined and censured New York-based brokerage firm Trident Partners, Ltd for failing to maintain a reasonable supervisory system with respect to the sale of Steepeners. FINRA stated that Trident allowed its representatives to recommend Steepeners without any reasonable basis on which to make those recommendations. Between 2010 and 2012, the firm sold more than 1600 of these investments, which generated approximately 10% of the firm’s commission income.
If you have suffered investment losses as a result of malpractice or misconduct our experienced team of investment fraud attorneys may be able to assist you in recovering some or all of your losses. Call us toll-free at 888-607-4819 for a free consultation or email us through our “Contact” page to schedule a free consultation.