Call Now For a Free Consultation:
(614) 502-6165

Investor Alert: Be Leery of "Bond-like" Investment Products

Investor Alert: Be Leery of “Bond-Like” Investment Products. The Same Investment Product Can't Both be Safe and Make Up Past Investment Losses

Investors have been chasing yield for years now, trying to make up losses sustained during the 2007-2008 financial crisis. They’re also attempting to preserve their current assets by investing in “safe” products. Unfortunately, these two goals can’t be met with the same product, and investors looking for such investments often get taken advantage of by con artists and unscrupulous brokers and advisers. Bonds are a good example of this.

Investors looking for guaranteed, stable returns typically invest in bonds, because they are marketed as safe products that carry little to no risk to principal.

Unfortunately for investors, this is a myth. Bonds do carry risks, and products marketed as “bond-like” carry even more.

Reverse convertibles, for example, are often marketed to unsophisticated investors as “bond-like” products that offer a higher-yield alternative to traditional equity and fixed income investments. The investment products’ many drawbacks aren’t discussed, however, and investors who thought they were preserving their assets by investing in them can end up losing all of their principal investments.

Brokerage firms and other financial professionals also use investors’ perceptions of bonds to sell structured products– extremely complex investments that carry a wide range of risks.

Securities America, for example, sold $700 million of private placement notes in Medical Capital Holdings, Inc. by telling advisers the products were “the missing piece that should be included in your fixed-income arsenal.”

Advisers took them up on this, and investors ended up losing everything.

The Hartford Financial Services Group Inc. also allegedly used misleading statements about bonds to sell one of its mutual funds, the Hartford Floating Rate Fund (HFLAX).

“In particular, the brochure [for the fund] contained misleading statements that the mutual fund was appropriate for bond investors concerned about the price stability of their investments, provided the potential for greater price stability compared with other fixed income investments, and was appropriate for investors seeking some degree of capital preservation,” stated FINRA. “Given the conditions in the bank loan market during the relevant period, these statements were not accurate.”

Bottom line? Investors looking for safe investments should be leery of any marketing claims that reference bonds. Most aren’t what they seem.

About our law firm:

Meyer Wilson represents individuals across the country who have been harmed by investment fraud. All of our cases are handled on a contingency fee basis and we never request a retainer of any kind. Contact us for more information or complete the online form on the top of this page and we will respond promptly.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation
Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram