Securities Regulator Alerts the Public About Dangerous Investments and Investment Strategies


The Financial Industry Regulatory Authority (FINRA) recently issued a report outlining is its regulatory and examination priorities for 2012. The securities industry regulator is focusing on conduct and products meant to beat the market that are unsuitable investments for many investors.

According to the report, “FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud.” The report goes on to indicate “Given the low yields on Treasuries, we are concerned that investors may be inadvertently taking risks that they do not understand or that are inadequately disclosed as they chase yields.”

Listed on among the products that are on FINRA’s watch list are: residential- and commercial-mortgage-backed securities, non-traded real estate investment trusts, municipal securities, exchange-traded funds using synthetic derivatives and significant leverage, variable annuities, structured products, private placements and life settlements. High-frequency trading, and oversight of the creation and redemption of exchange-traded funds were also areas FINRA indicated it would focus.

According to attorney Pratt H. Davis at Page Perry, a securities arbitration and litigation firm, “investors, especially seniors on limited incomes, need to be very skeptical of sales tactics and products that promise to increase the return with no corresponding increase in the risk.”

The report also indicates that FINRA is also focusing in on fees, indicating “We remain concerned about firms’ charging retail investors hidden, mislabeled or excessive fees,” the letter states. “In 2011, FINRA brought cases against several broker-dealers that charged such excessive fees in the form of postage and handling charges that were unrelated to actual costs, and we will continue to investigate firms that appear to be taking advantage of investors through fee schemes.”

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.