RIA Insurance Mandates Didn't Reduce Access to Advisory Services
(Aug 2024)
By Craig McCann and
Chuan Qin
You can download a PDF of this article to print or email here
Introduction
Errors and omissions (E&O) insurance can help fund resolution of customer complaints against investment advisers. Many advisors are not insured or have minimal insurance, choosing to fund settlements and awards directly at the risk a particularly costly resolution might bankrupt the advisor. When advisors are unable to pay an adverse judgment, the investor suffers more than the...
Autocallables 2024 Part II: Lucid-linked Notes
(Mar 2024)
By Craig McCann and
Mike Yan
Yesterday, we described the rapid growth in Autocallable structured products; $122 billion have been sold in the past 4 years. You can read our first post on autocallables here.
In this, our second, post, we illustrate features of autocallables with reference to the five notes linked to the stock price of Lucid.
Our third post, available here, highlights a Silicon Valley Bank linked autocallable sold by Citigroup after the close on March 9, 2023 right...
Autocallables 2024 Part I
(Mar 2024)
By Craig McCann and
Mike Yan
Introduction
We have published extensively on structured products over the past 20 years. We published two papers dealing specifically with autocallable structured products - one in 2011 and one in 2015.[1] Since 2015, while we were focused on other research projects, the issuance of autocallable structured products has exploded, issuers have become more creative, the variety of products has proliferated and the potential for investor harm has increased...
Howard Capital Management Funds Charge High Fees to Misuse Leveraged ETFs
(Jan 2024)
By Craig McCann and Susan Song
You can download a copy of this note to print or email here.
Introduction
Howard Capital Management ("HCM") is a SEC-registered RIA based in Roswell, GA.[1] In addition to advising individual accounts,
it manages mutual funds and ETFs. It claims to use proprietary technical analysis, HCM-BuyLine(R), to market-time the funds' asset allocations.
Without any risk disclosure, HCM's mutual funds buy and hold leveraged ETFs for much longer periods than is...
L Bond Were Always Impaired
(Nov 2023)
By Craig McCann and Regina Meng
You can download a pdf of this article to print or email here.
Introduction
GWG bonds were always impaired. GWG was able to sell impaired bonds for 10 years because its equity float was too small to be covered by Wall Street analysts, its stock was too thinly traded to short sell and third tier brokerage firms looked the other way in exchange for extraordinary sales commissions.
In "GWG's Decade-long Fraud Started Well Before Beneficient Joined In" we...
Beneficient's Trading is Bad Omen for GWG Bondholder Recoveries
(Jun 2023)
By Craig McCann and Regina Meng.
We have found so many red flags in GWG Holdings' public filings years before its bankruptcy filing in 2022 that no unconflicted broker would have recommended GWG's L Bonds and no fully informed investor would have bought them. Nonetheless, $1.3 billion face value of L Bonds remained outstanding at the time of the bankruptcy. These bonds were sold by third tier brokerage firms in pursuit of undisclosed commissions as high as 8%.
We will tell a more...
Blackstone's Choice: Let BREIT Crash or Collapse It Slowly?
(Dec 2022)
By Craig McCann and Regina Meng.
Introduction
Last week, Blackstone Real Estate Income Trust ("BREIT") announced that it was not going to honor redemption requests from investors in excess of 2% per month and 5% per quarter. In response, Blackstone's stock price fell 7% the first day and another 7% over the following week.
In this note, we explain how BREIT smoothed and inflated its reported returns for years, leading to extraordinary accolades, a prominent role in important regulatory...
Regulation D Offerings Summary Statistics
(Aug 2022)
By Craig McCann, Chuan Qin and Mike Yan.
I. Introduction
Securities issuers can either register their securities with the Securities and Exchange Commission, making extensive information about their business and the offering publicly available, or they can sell unregistered securities making almost no information available to regulators. Issuers of unregistered securities file Form D reports with the SEC on which the issuers provide cursory information and claim an exemption from...
YES Strategies: Know to say no
(May 2019)
In recent years, low yields in the bond market and low volatility in the equity markets have combined to give brokerage firms the excuse to develop and sell "Yield Enhancement Strategies (YES)" to retail investors. These strategies almost always consist of selling options on the S&P 500. The sale of an option garners a premium but places the seller (the retail investor) in a short option position. Being short on a call or put option is a risky place to be. In the best-case scenario, the...
Material Misrepresentations in XIV's Prospectus Led to $700 Million in Losses
(Mar 2018)
Executive Summary
Credit Suisse's XIV Exchange Traded Note (ETN) linked to the inverse of short-term VIX futures prices lost 97% of its value or approximately $2 billion in a single day on February 5, 2018. Credit Suisse announced the following morning that it would redeem all outstanding XIV shares at the Closing Indicative Value on February 15, 2018.1
Figure 1 reports the daily closing price for XIV from its inception in November 2010 to its demise in February 2018. The run-up in 2017...
