Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Broker Eliab Alonzo (Alonzo), currently employed by Cetera Advisor Networks LLC has been subject to at least one disclosable event. These events include one customer complaint. According to records kept by The Financial Industry Regulatory Authority (FINRA), Alonzo’s most recent customer complaint alleges that Alonzo recommended unsuitable investments in structured products and makes allegations concerning misconduct relating to the handling of the customer’s accounts.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $95,000.00 on October 24, 2024.
Client alleges that structured notes purchased in October 2021 were unsuitable and performed poorly.
The performance of structured products, driven by the market data, are a type of derivative. Market risk in a structured product is generally taken based on a referenced source. The source can be a single security, a basket of securities such as a market index, commodities, interest rates, or a real estate loan portfolio. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.
Structured products typically offer less attractive risk/return profiles than conventional debt or equity investments, as issuing firms—mainly large banks—capitalize on the difference between investor returns and the earnings from issuing structured notes, after subtracting commissions and fees paid to brokers. Due to the intricate nature of these products, many investors will lack the ability to accurately weigh their merits or estimate the probability of returns versus losses. These investments are often misrepresented by brokers as fixed income or bond-like options that provide a return of capital. Because structured products carry a higher risk of loss compared to corporate debt and other fixed-income investments, they should not typically be recommended as fixed-income alternatives.
Recently, firms have begun selling redeemable structured notes often linked to a single investment or a basket of investments. Several examples of structured products tied to individual securities highlight the extreme risks of these investments without providing significant benefits. Our firm assessed a structured note linked to Peloton’s stock that provided investors with 1.0625% interest per month (12.75% annually) and another note tied to Zillow’s stock, offering a 12% annual interest paid monthly, conditional on the stock prices maintaining a level above the referenced value. The interest payment remains intact unless both stocks experience a loss of about 40% of their value. In addition, if the stocks lost more than approximately 40% of their value then the investor would also lose their corresponding principal based upon the performance of the stocks and could lose their entire investment. Further, the notes were callable and could be cancelled by the sponsor.
These products are very high risk and low reward propositions because the investor can only profit at most by 12-12.75% over the course of one year. Even if Peloton or Zillow doubled in value all the investor could achieve would be the interest payment as their profit and none of the price appreciation. Meanwhile the maximum loss is 100% of the investment if the stocks fell severely. Accordingly, the investor takes dramatic downside risks associated with the volatile stocks while having no chance to participate in the success of the stock.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases.
Alonzo entered the securities industry in 2006. Alonzo has been registered as a Broker with Cetera Advisor Networks LLC since 2021.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.
