Our securities fraud lawyers are looking into claims by investors regarding their purchase of reverse convertible notes from H&R Block Financial Advisors. Just this week, the Financial Industry Regulatory Authority imposed a $200,000 fine on the broker-dealer for failing to set up proper supervisory systems over RCN sales. H & R Block was also ordered to pay $75,000 to an elderly couple that sustained financial losses from their RCN investments.
FINRA found that not only did H & R Block fail to properly monitor customer accounts for possible RCN over-concentrations, but they also failed to detect and respond to these possible over-concentrations. This is FINRA’s first enforcement action over RCN sales.
Reverse Convertible Notes
An RCN is usually an issuer’s high-yield short-term note that is a put option connected to the performance of an unrelated asset (such as an index or a common stock). Upon maturity of the RCN the investor should either get a predetermined amount of shares of the linked equity or the full principal investment. The higher the coupon rate, the greater the expected volatility and the chances that shares will be paid. Risks that accompany RCNs include inflation risk, issuer default, and the underlying asset risks. Most RCNs require an initial investment of $1,000/unit. The majority of maturity dates run from 3 -12 months.
FINRA has issued an Investor Alert called Reverse Convertibles – Complex Investment Vehicles to help consumers better understand RCNs. It also put out Regulatory Notice 10-09 to remind broker-dealers of their sales practice obligations when selling RCNs to retail investors.
Please contact our stockbroker fraud law firm to discuss your H & R RCN investments. Shepherd Smith Edwards & Kantas LTD LLP has successfully helped thousands of clients recover their investment losses.
Related Web Resources:
Shepherd Smith Edwards & Kantas LTD LLP Investigates Claims for Clients of H&R Block Financial Advisors in Light of Regulatory Fines for Inadequate Supervision of Reverse Convertible Notes, News Blaze, February 18, 2010
FINRA fines, suspends Andrew MacGill over sale of revertibles, Bizjournals, February 15, 2010
Reverse Convertibles-Complex Investment Vehicles, FINRA