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SEC Reviewing Principal Protected Note Sales

The U.S. Securities and Exchange Commission is currently reviewing how several financial firms marketed principal protected notes to investors. Specifically, the SEC’s Division of Corporate Finance is evaluating how companies describe the products’ risks and whether it is misleading to call these structured notes “principal protected,” which implies these notes are guaranteed not to decline in value. This review takes place after investors claimed they lost more than $1 billion in principal protected notes issued by Lehman Brothers Holdings. Inc. Findings made by the Division of Corporate Finance will potentially be referred to the SEC’s enforcement division, which investigates fraud.

For on this issue see “Several FINRA Arbitration Panels Find in Favor of Investors in Lehman Brothers Principal Protected Structured Notes.”