FINRA Investor Alert: Closed-End Fund Distributions
(Nov 2013)
The Financial Industry Regulatory Authority (FINRA) recently released an Investor Alert to draw investors attention to the subtle difference between distributions and returns in the context ofclosed-end funds. Closed-end funds are pooled investments like mutual funds (which are also known as 'open-end funds'), but have only a fixed number of shares. This distinction has a big impact on how the fund is analyzed.
Distributions from closed-end funds are typically quoted as a rate (e.g. 6%). This...
FINRA Investor Alert: Private Placements
(Sep 2013)
Many of the riskiest financial products we have seen are sold as private placements. Generally speaking, private placements are investments sold directly to accredited investors, and are not registered with the SEC. Private placements include hedge funds, oil and gas partnerships, private real estate investment trusts, and other speculative investments.
Yesterday, FINRA released an Investor Alert on private placements. In it, they warn investors that sales abuses and even fraud have been...
FINRA Issues Investor Alert on Alternative Funds
(Jun 2013)
The Financial Industry Regulatory Authority (FINRA) recently released an investor alert entitled "Alternative Funds Are Not Your Typical Mutual Funds". FINRA defines Alternative (Alt) Funds as mutual funds that "seek to accomplish the fund's objectives through non-traditional investments and trading strategies."
These funds have garnered significant assets in recent years -- over $175 billion as of May 2013 -- as investors stretch beyond traditional stock and bond allocations for additional...
FINRA, SEC Issue Investor Alert on Pension and Structured Settlement Income Streams
(May 2013)
Last week, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) issued investor alerts concerning pension and structured settlement income streams. The SEC's investor bulletin and FINRA's investor alert can be found online. We haven't discussed the potential problems surrounding pension or structured settlement income streams before, but these regulatory notices highlight some of the potential issues that we think are important for...
State Securities Administrators Issue List of Top Ten Investment Scams
(Aug 2012)
The North American Securities Administrators Association (NASAA) has just published its annual list of the most prevalent scams. Among the usual suspects (oil and gas drilling programs, real estate fraud, precious metals) is a warning about "inappropriate advice or practices from investment advisers." Bernie Madoff was a registered investment adviser (RIA). His fraud has drawn significant scrutiny to an industry not accustomed to the attention.
The registered investment advisory business is...
Many ETF Issuers Consolidating Offerings
(Aug 2012)
As inflows to ETFs have exploded over the past few years, many issuers expanded their lineup of funds to take advantage of the increased investor interest. Some have tried to compete with established funds by creating funds with very similar exposure, while others have offered highly specific investment strategies in an attempt to capture a niche market.
In general the ETF market has exhibited a 'winner take all' pattern whereby the oldest and largest funds attract by far the most investor...
FINRA Issues Warning on ETNs
(Jul 2012)
The Financial Industry Regulatory Authority (FINRA) recently issued an Investor Alert regarding the risks of exchange-traded notes (ETNs).
ETNs are a type of unsecured debt instrument typically issued by banks and other financial institutions. Similar to its close cousin the exchange-traded fund (ETF), ETNs track the returns of a specified asset class--often an index. However, unlike ETFs, ETNs do not hold actual assets tracked by the underlying index. This means investors in ETNs can suffer...
FINRA Investor Alert: Equity-Indexed Annuities
(Sep 2010)
Equity-Indexed Annuities - A Complex Choice
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the rewards and risks of equity-indexed annuities. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. Equity-indexed annuities (EIA) are similar to both fixed and variable annuities. They pay an interest rate linked to an equity index and guarantee...
FINRA Investor Alert: Life Settlements
(Jul 2009)
Seniors Beware: What You Should Know About Life Settlements
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on life settlement. Life settlement is the transaction that involves selling one's life insurance policy to a third party that did not issue the policy for a lump sum payment whose value is higher than the policy's cash surrender value but less than the net death benefit.
Because life settlement is targeted at senior people, the industry can be...
FINRA Investor Alert: Variable Annuities
(Mar 2006)
Should You Exchange Your Variable Annuity?
The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on how to determine if investors should exchange their variable annuity for another model. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments.
While equity-indexed annuities have become increasingly popular, some have questioned their value and...
