It seems small retail investors are still a glutton for punishment. A number of retail investors learned a harsh lesson last year when the convertible feature of their reverse convertible bonds kicked in and their high yielding bonds morphed into rapidly sinking equities. There are certain varieties of structured products that retail investors can take issue with because they weren’t fully aware of a seemingly minor structural mechanic that came back to bite them. This isn’t one of them. Even by retail investor standards, the key mechanic, the knock-in level, is spelled out clearly.
An 85 year old retired radiologist has filed a complaint with FINRA looking to recoup $75k in losses he suffered from his reverse converts. This is entering some seriously dangerous territory. If we’re going to allow selective investor financial amnesia to qualify as evidence of wrongdoing by banks, structured products will be nothing more than a winning lottery ticket for retail investors.
“I had no idea this could happen,” says Dr. Batlan, a resident of Clifton, N.J. “I have no desire to own Yahoo stock or the others.”
Reverse Converts: A Nest-Egg Slasher? [WSJ]
Update: Mr. Batlan’s law firm, Zamansky & Associates, is reporting that the Citi broker who purchased $300k in ELKS allegedly did so without his authorization.
Reverse Convertibles and the Cautionary Tale of Dr. Batlin [Zamansky.com]