Please call 303-300-5022 or toll-free at 844-253-5858 if you were a Paulson Investment client a sold a steepener or other variable interest rate investment. Our firm handles complaints concerning such unsuitable investments. We were previously featured in Bloomberg concerning the issue.
Paulson Investments recently entered into a regulatory settlement with the Financial Industry Regulatory Authority (FINRA). FINRA is the regulatory organization under the oversight of the Securities and Exchange Commission (SEC) that regulates securities brokerages. FINRA brought a claim and ultimately settled with Paulson over the inappropriate sale of variable interest rate structured products (VSRPs). The investments were sold to moderate risk and growth investors despite the investment being a high-risk, speculative investment. The settlement included a fine and a censor.
As stated in FINRA’s announcement, VRSPs are a category of complex structured products that initially pay interest at a fixed rate. The rate is an above-market “teaser” rate for a short period of time, typically one year. Then it switches to a floating interest rate that is based on a reference index (like the S&P 500). VRSPs typically have long maturities, generally between 10 and 30 years.
A “steepener” is one type of VRSP that pays a high teaser interest rate, usually between
8% and 10% for the first year, and then resets to a floating interest rate the steepness of the yield curve. The “Yield Curve” is the spread between two indexes. Commonly the spread between the 30-Year Constant Maturity Swap (CMS) rate and 2-Year CMS rate are used. Because the spread between longer- and shorter-term interest rates can become equal or inverse, referred to as “flattening”, investors holding steepeners can earn little or zero interest for years and the value of the investment plummets.
Federal regulations require that securities brokers only recommend suitable investments to their investors. This means that investments identified as speculative investments cannot be recommended to investors looking for income, growth, moderate or conservative risk.
If your were sold such a VSRP investment, such as a steepener or similar product, please call for a free and confidential consultation. We represent investors in such disputes nationwide.