National investment loss lawyers KlaymanToskes issues notice to investors in First Republic structured products who suffered losses due to unsuitable investment recommendations. Investors who suffered losses may be entitled to a financial recovery.
Since the collapse of Silicon Valley Bank, its regional partners, including First Republic Bank, have been critically impacted. First Republic Bank’s common stock lost half of its value today due to reports that it may fall into receivership with the U.S. Federal Deposit Insurance Corporation (FDIC).
Today, as of April 28th, First Republic’s stock (NYSE: FRC) reached an all-time low of $2.98, representing a 98% decrease from its high of $219.16 in November 2021. If the San Francisco-based lender enters into a receivership with the FDIC, it will be the third U.S. bank to collapse since March 2023.
First Republic Bank investors who suffered significant investment losses due to high-risk structured products should contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lklayman@klaymantoskes.com to discuss our investigation and recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
Structured products, commonly referred to as structured notes, are corporate debt obligations that also contain an “embedded derivative component” that adjusts the security’s risk/return profile. The return performance of a structured investment product will track both the underlying debt obligation and the derivative embedded within it.
These investment products may also be considered “hybrid” securities, as they have two underlying components, a bond and a derivative. The bond component of a structured note provides the investor with principal protection and takes up most of the note, while the rest of the investment makes up a derivative product which may provide investors with upside potential.
Structured product returns are linked to the performance of an underlying asset, group of assets, or an index. This is generally based on equity indexes, a basket of equities, interest rates, commodities, or foreign currencies. Common types of structured notes include principal-protected notes, reverse convertible notes, and leveraged notes.
Investors may be drawn to invest in structured products due to the potential for high gains offered. However, these investments involve a high degree of risk and may cause investors to lose the entirety of their principal.
Structured products present a number of risks to investors, mostly due to their illiquid nature, market risk, and default risk. The complexity of these investments often make them volatile, and they are sometimes compared to options contracts. In addition, investors should expect to hold structured notes until maturity, as it can be very difficult to sell illiquid structured notes on a secondary market.
While many, if not all investments may suffer from market risk, structured notes are especially high-risk when the underlying derivative becomes volatile due to market conditions. Investors in structured notes may also face higher default risks due to the investment’s combined nature of debt obligations intertwined with derivatives. If the issuer of a structured note defaults, the entire investment may be lost.
Interestingly, First Republic Securities Company’s Transparency Brochure, under the “Structured Products” section, “Wealth Managers are compensated on the sales credit embedded in the price of the structured product and may be further compensated by a markdown if sold in a secondary market transaction.”
First Republic further states that “this compensation structure creates a conflict of interest that incentivizes a Wealth Manager to recommend frequent structured product transactions.”
Financial professionals and their firms have a fiduciary duty to recommend suitable investments that are in their customer’s best interest. A representative that recommends investments for the purpose of being compensated through increased commissions, and enriches themselves rather than benefiting the client, is violating securities laws.
KlaymanToskes believes the best solution for First Republic investors seeking to recover investment losses is a FINRA (Financial Industry Regulatory Authority) arbitration claim. Arbitration is generally the most cost-effective, timely, and rewarding course of action for investors seeking to recoup their losses. Learn more about the arbitration process in our recent post, linked here.
Investors in First Republic structured products who sustained losses in structured investment products are encouraged to contact attorney Lawrence L. Klayman, Esq. at (888) 997-9956 or lklayman@klaymantoskes.com for a free consultation. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lklayman@klaymantoskes.com
www.klaymantoskes.com