Structured Certificates of Deposit Week
(Feb 2013)
Over the past several months, we have noticed more and more bank deposits that resemble structured products. These products go by various names: market-linked certificates of deposit, equity-linked certificates of deposit, contingent interest certificates of deposits, etc. For parsimony, we refer to these types of products as "structured CDs" or simply "SCDs".
We think structured CDs are a very significant development, as they can be designed to provide highly complex exposure, are almost...
SEC Litigation Releases: Week in Review -February 1st, 2013
(Feb 2013)
SEC Charges Five Former Executives of Cay Clubs Resorts and Marinas in $300 Million Real Estate Investment Fraud
January 30, 2013, (Litigation Release No. 22607)
According to the complaint (opens to PDF), Cay Clubs Resorts and Marinas' former executives, Fred Davis Clark, Jr., Cristal R. Coleman, David W. Schwarz, Barry J. Graham, and Ricky Lynn Stokes conducted "an offering fraud and Ponzi scheme that raised more than $300 million from nearly 1,400 investors nationwide." Allegedly, from 2004...
Apple's Declining Stock Price and Structured Products
(Jan 2013)
Jason Zweig at the Wall Street Journal has an excellent piece on a part of the Apple story that hasn't gotten much press: many equity-linked structured products are linked to the common stock of Apple.
SLCG has recently completed an analysis of the market value of outstanding structured products linked to Apple common stock (AAPL). In the following figure, we plot the total quarterly issuance of AAPL-linked structured products in our database since the first quarter of 2009.
As Apple's common...
What a CDO 'Resurgence' Might Mean for Investors
(Jan 2013)
Kaitlin Ugolik at Law360 had an article on Wednesday discussing the recent "bump in demand for collateralized debt obligations." CDOs are complex derivatives that pool assets together and split the risk of that portfolio into tranches which are then sold to investors. CDOs have been implicated in the financial crisis of 2008 and have seen a strong drop-off in new issuances since, though that tide may now be changing.
According to the article, some lenders are predicting a large increase in...
FINRA Dispute Resolution Statistics 2012
(Jan 2013)
Last week, we covered NERA's analysis of SEC settlements during FY2012. This week, we're taking a look at FINRA's recent release of their dispute resolution summary statistics. FINRA arbitration is a common way for investors to pursue restitution for damage caused by fraud, negligence, or other fiduciary breaches. FINRA provides a detailed summary of the arbitration process and claims can be filed either online or by mail.
Through December of this year, FINRA reports that the number of new...
The Basics of Options Contracts
(Jan 2013)
In a lot of our research work, we break down complex financial products into simpler pieces and then value those simple pieces one at a time. Often, those smaller components are options contracts (especially in our structured product work), which are relatively easy for practitioners to value. However, options contracts use a peculiar terminology that can be confusing to the uninitiated, so we thought we would lay out exactly what we mean when we talk about options.
Options contracts are...
Structured Products: 2012 Year-End Market Review
(Jan 2013)
Last year, we covered Bloomberg's summary of the 2011 structured product market by noting that almost "$45.5 billion worth of SEC registered structured products were sold in the US in 2011, down only slightly from $49.4 billion in 2010." In 2012, 7,909 notes totaling just over $39 billion worth of SEC registered structured products were sold in the US -- a decrease of nearly 15%.
Interest rate products continued their decline in popularity with a decrease of almost 30% from 2011 to 2012....
