If you have lost money investing in autocallable structured notes or other types of structured products, please call our office today.  You may be able to recover some or all of your investment losses through securities arbitration. 

The securities and investment fraud lawyers at Israels & Neuman PLC have handled many cases involving structured products and can quickly determine if you are eligible to bring an arbitration case to try to recoup your losses.  Our consultations are always free and we work on a contingency fee basis, meaning you don’t pay us unless we successfully recover money for you.

We recently read an excellent 5-part article series on autocallable structured products, written by Craig McCann and Mike Yan of SLCG.  Mr. McCann is an expert witness.

The first part of the original article can be found here, but we summarized it for you below.

Summary:

Autocallable structured products have seen a dramatic rise in issuance over the past decade, but they come with significant risks that many investors do not fully understand.

Understanding Autocallables

Autocallable structured products are complex financial instruments that offer high yields through periodic coupon payments. However, their structure includes embedded short put options that expose investors to substantial risk.

At maturity, an autocallable note will return its face value only if the underlying stock price remains above a set threshold (often referred to as the “knock-in level”). If the stock price falls below this level, the investor will receive a payout based on the stock’s lower value—often resulting in significant losses.

These products are often marketed as providing attractive returns, but the reality is that they can leave investors with devalued assets instead of their initial investment.

The Growth of Autocallables: A Surge in Issuance

McCann and Yan’s article, referenced above, documents the explosion in autocallable note issuance over the past ten years. Their data shows:

• 2007-2013: 889 issuances, averaging $3.1 billion per year.
• 2014-2018: 4,809 issuances, averaging $11.6 billion per year.
• 2019-2023: 11,122 issuances, averaging $27.9 billion per year.

Over $92.5 billion worth of autocallables have been issued in just the last three years alone. This rapid increase reflects both their popularity with financial institutions and the hidden risks many investors face.

Why Are Autocallables So Risky?

Several features make autocallables particularly dangerous for retail investors:

1. High Coupon Payments Are Misleading
   While autocallables pay attractive yields, these payments are not guaranteed. Some notes require the underlying stock to stay above a certain level for the coupon to be paid. If the stock price declines, investors may receive little to no income.
2. Automatic Call Feature Favors Issuers
   If the stock price remains stable or rises, issuers can call the note early, returning the investor’s principal—but without any further upside. This structure benefits the issuer while capping potential gains for the investor.
3. “Worst-of-Basket” Notes
   Some autocallables track multiple stocks, and investors receive payouts based on the worst-performing stock in the basket. This further increases the likelihood of losses.
4. Limited Transparency and Hidden Risks
   Brokerage firms market these products as safe, often downplaying the risks. However, as McCann and Yan point out, autocallables are simply a more complex version of reverse convertibles—structured products that suffered massive losses in 2008-2009.

Real-World Examples: Autocallables Gone Wrong

McCann and Yan highlight specific examples of autocallables linked to Lucid Group (LCID) stock, showing how these products can quickly become worthless:

• One note linked to Lucid and Uber was called early, allowing investors to exit without loss.
• However, four other Lucid-linked notes failed to pay any coupons, as Lucid’s stock price dropped from $40 to less than $3.
• Investors in these notes are now likely to receive less than $10 per $100 face value at maturity—an enormous loss.

What Investors Should Do

If you have been sold an autocallable structured product and experienced losses, you may have legal options. These products are often marketed to potential investors without fully explaining their risks, potentially leading to misrepresentation or unsuitable sales practices by brokers.

At Israels & Neuman, PLC, we specialize in representing investors who have been harmed by unsuitable investments and misrepresentations. If you or someone you know has suffered losses from autocallables or other structured products, contact us today at (616) 280-4303 for a free consultation.

Did you invest with financial advisor Thomas Duggan, formerly with Aegis Capital in Melville, New York? Our investment fraud law firm is reviewing claims made by former customers against this advisor.

Thomas Duggan has been the subject of nine customer complaints throughout his career, and eight of those complaints have been made since 2019. Many of the complaints allege that he breached his fiduciary duties and made unsuitable investment recommendations to customers. These cases settled for an aggregate of $1.3 million.

Thomas Duggan was a representative of Aegis Capital from January 2016 to May 2022. He worked in a Melville, New York office.

Israels & Neuman is an investment fraud law firm that represents clients throughout the U.S. We have represented over 1,000 investors against many different firms in the past, including against Aegis Capital.

You can find Thomas Duggan’s BrokerCheck Report HERE.

If you lost money with Thomas Duggan or Aegis Capital, contact the law firm of ISRAELS & NEUMAN at (616) 280-4303 or (206) 795-5798 for a Free evaluation of your case.

NEW YORK, NY Are you a former customer of financial advisor Steven Schmitt from New York, New York? The investment fraud and securities arbitration law firm of Israels & Neuman is reviewing allegations made against this advisor, who previously worked with Morgan Stanley and is now with Raymond James.

Morgan Stanley was sued in FINRA arbitration in December 2023 regarding Mr. Schmitt’s conduct. It was alleged that he executed an unsuitable investment strategy in a customer’s account from 2018 to 2022. The investor allegedly lost $385,000 because of this strategy.

Steven W. Schmitt was with Morgan Stanley in New York from October 2016 to November 2022, and is currently with Raymond James in Paramus, New Jersey.

Morgan Stanley is a FINRA member firm and must have written supervisory and compliance procedures, under securities rules and regulations. If brokerage firms fail to reasonably supervise their advisors, they may be held liable for customer losses.

Israels & Neuman has represented numerous investors throughout New York and New Jersey and have sued dozens of brokerage firms in the past, recovering millions of dollars for investors who have suffered investment losses.

VIEW BROKERCHECK REPORT HERE.

If you lost money with Steven Schmitt or Morgan Stanley, please Contact Us at (206) 795-5798 for a free evaluation of your case.

Rodger Thomas was with SCF Securities from December 2016 to August 2018. He was also with Kovack Securities from August 2018 to October 2018 and has been with Newbridge Securities Corp. from October 2018 to the present. He has worked at branch offices in Livingston, New Jersey.

Brokerage firms like SCF Securities and Newbridge Securities Corp. have a responsibility to adequately supervise all representatives who are registered through their firm. Brokerage firms also must take steps to ensure that their financial advisors follow all securities rules and regulations, as well as internal firm policies. When brokerage firms fail to adequately supervise their registered representatives, they may be liable for investment losses sustained by customers.

Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado; Seattle, Washington; Phoenix, Arizona; and Ann Arbor, Michigan. We represent investors in FINRA arbitration proceedings in all 50 states, including investors in New Jersey. Our attorneys have represented over one thousand investors against many brokerage firms in the past, including against SCF Securities.

View R. Thomas BrokerCheck Report

If you lost money with Rodger Thomas, GPB, SCF Securities, or Newbridge Securities Corp., contact the law firm of ISRAELS & NEUMAN at (720) 599-3505 or (206) 795-5798 for a Free evaluation of your case.

Kevin Dooley has been with AXA Advisors (now Equitable Advisors) from 1995 to the present. He has worked at branch offices in Miami, Florida. Dooley was also the subject of another customer complaint regarding REITs that settled for $690,000.

Brokerage firms like AXA Advisors have a responsibility to adequately supervise all representatives who are registered through their firm. Brokerage firms also must take steps to ensure that their financial advisors follow all securities rules and regulations, as well as internal firm policies. When brokerage firms fail to adequately supervise their registered representatives, they may be liable for investment losses sustained by customers.

Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado; Seattle, Washington; Phoenix, Arizona; and Ann Arbor, Michigan. We represent investors in FINRA arbitration proceedings in all 50 states, including investors in Florida. Our attorneys have represented over one thousand investors against many brokerage firms in the past, including against AXA Advisors.

View K Dooley BrokerCheck Report

If you lost money with Kevin Dooley or AXA Advisors, contact the law firm of ISRAELS & NEUMAN at (720) 599-3505 or (206) 795-5798 for a Free evaluation of your case.