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

SEC Looks Into the Marketing of "Principal-Protected" Notes

Numerous financial companies have been asked how they market “principal-protected” notes, which follows the collapse of Lehman Brothers Holdings Inc. When Lehman Brothers went bankrupt in 2008, the principal-protected notes that the company had guaranteed significantly declined in value. As a result, investors reportedly lost at least $1.7 billion. These investors claim that they received “misleading” information and the phrase, “100 percent principal protection,” was used to market the notes. The U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance is now examining how these products are being marketed, including how the risks are described and whether the term “principal-protected” is misleading. One of the main concerns is that this term could imply that the investment is guaranteed not to decline in value. The division’s findings may be sent to the enforcement unit, which is charged with investigating fraud.Citigroup Inc., was among the financial institutions that had used the term, but it removed it from a brochure that was filed with the SEC on June 15th. Barclays Plc, Morgan Stanley and Bank of America Corp. have also described structured notes as “principal-protected.” According to Kenneth Lench, head of the SEC’s Structured and New Products enforcement unit, “you’ve got these long disclosure documents, but oftentimes there are marketing materials and those have to be accurate as well.” Last year, the Financial Industry Regulatory Authority (FINRA), sent a notice to brokers telling them to ensure that marketing materials for these securities were “fair and balanced.”

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