In the News: SEC Reviewing Sales of Structured Products

Bloomberg issued a news release today announcing that sales practices of banks and broker-dealers for structured products are being investigated by the Securities and Exchange Commission (SEC) for product overcharging and disclosure of conflicts of interest.

This is not a surprising new release: it is consistent with our findings in our paper on reverse convertibles, ‘What TiVo and JP Morgan teach us about Reverse Convertibles.’ In this paper, we find that brokerage firms consistently overcharged investors of reverse convertibles such that the calculated expected return of this structured product is negative. 

SLCG has a dedicated website providing papers, notes and calculation tools on a variety of structured products. Other related papers include:

• Modeling callable structured products
• Principal protected absolute return notes
• Structured products in the aftermath of Lehman Brothers