Is a Steepener a Type of Structured Note? Goodman & Nekvasil, P.A. May Recover Losses on Steepener Notes

What are Structured Notes?

Structured notes are securities issued by financial institutions whose returns are based on, among other things, equity indexes, a single equity security, a basket of equity securities, interest rates, commodities, and/or foreign currencies.  Thus, your return is “linked” to the performance of a reference asset or index.  Structured notes have a fixed maturity and include two components – a bond component and an embedded derivative.  Financial institutions typically design and issue structured notes, and broker-dealers sell them to individual investors.  Some common types of structured notes sold to individual investors include: principal protected notes, reverse convertible notes, enhanced participation or leveraged notes, and hybrid notes that combine multiple characteristics.

How is a Steepener a Type of Structured Note?

A steepener is a type of complex, structured investment product. Essentially, steepeners are a type of interest rate swap, where one party agrees to pay the other a fixed rate in exchange for a floating rate, which is derived from the difference between long and short term rates. Many of these products also used high leverage, where the difference between the two rates is multiplied by up to 50 times to produce a higher return.

What does this mean in simpler terms? Generally, it means that the investor is making a bet on the shape of the yield curve. If there is a large difference between long-term interest rates and short-term interest rates, there is a very steep yield curve. An investor who bet on a steepening curve would benefit if this difference continues to grow. In contrast, when there are relatively small differences between long-term interest rates and short-term interest rates, there is a flat curve. As you might expect, an investor who bet on a steepening curve would suffer losses if the difference between the rates starts to shrink.

Investors who invested in steepeners at the recommendations of their broker may have suffered serious financial losses. Steepeners are complex structured products, often with short-term teaser interest rates, long dated maturities and obscure features that caused them to lose capital rapidly along with greatly diminished interest payments.

You May Recover Losses in Structured Notes, including Steepener Notes through FINRA Arbitration

We believe that investors who have sustained losses in Structured Notes, including Steepener Notes, may be able to recover their losses through a FINRA arbitration claim. If you lost money in Structured Notes, including Steepener Notes, you should seek the advice of a lawyer who has experience representing investors in investment fraud and broker negligence cases to discuss their rights.

At Goodman & Nekvasil we work on a contingency basis for every one of our clients. No recovery = no fees or costs means that, as our client, you owe us nothing unless we obtain a recovery on your behalf. Attorney’s fees are only collected if you receive a recovery, and the same is true for costs. We bear the costs of your case throughout the process, only receiving compensation if you recover some of your losses. If you don’t win a recovery, we don’t get paid. We have established a fee structure that not only represents the faith we have in our clients’ cases but also motivates our firm truly to work in your best interest. We have aligned our goals with our clients’ goals, and it allows us aggressively to pursue recoveries with all of our resources. We are devoted to achieving the best outcomes for every one of our clients.