Morgan Stanley, Ameriprise & UBS Receive Subpoenas Regarding the Sale of Reverse Convertibles in Georgia
Georgia has issued subpoenas requesting information from Morgan Stanley, UBS AG and Ameriprise Financial, in its continuing investigation in to whether Wall Street firms broke any of the state's securities laws in the sales of reverse convertibles, according to Bloomberg.
Reverse convertibles are short term bonds that are sold to investors that convert to stock if a company's share price drops dramatically. After the receipt of many investor complaints, the state began examining the securities in May 2011. Accordingly, subpoenas were sent to each of the firms seeking to determine how many reverse convertibles they sold in Georgia, as well as a list of the names of the investors. Vincent Russo, general counsel and acting assistant securities commissioner for the Secretary of State's office and Matt Carrothers, said that they have multiple investigations going on with regard to the sale of reverse convertible notes and they are sifting through all of the evidence to assure that Georgia investors are protected.
Sales of structured notes are normally sold to individual investors seeking higher returns at a time when interest rates are at historical lows and the stock market is saddled with volatility amid all of the prevalent economic uncertainties. The sales have been soaring as investors chase returns. Unfortunately, higher returns means higher risks and these complex structured investment vehicles are difficult to understand and evaluate. As a matter of fact, often times the representative marketing and selling the product might not understand the risks involved either.
Georgia is not alone in its investigation into complex structured product sales to investors. Massachusetts is conducting its own investigation into the marketing and sales of reverse convertibles to elderly and unsophisticated investors. Likewise, the Securities and Exchange Commission (SEC) has investigated Goldman Sachs Group's sales of subprime mortgage backed securities (MBS) and whether the firm overcharged investors for the notes.
If you have suffered losses in reverse convertible notes, contact our securities law firm at 1-800-259-9010 for a free consultation.