Structured notes look simple on the surface. A broker tells you they combine the safety of a bond with the growth potential of the stock market. You sign the paperwork, hand over your money, and wait for returns. Then the market shifts. You Discover your principal is not protected the way you believed. The call feature you were told was a safety valve has locked in your losses. Your broker is no longer returning your calls. This happens to thousands of investors every year, and it is not your fault. A structured notes lawyer can review your case, determine whether your broker committed fraud or negligence, and file a FINRA arbitration claim to recover your money.
Haselkorn & Thibaut, a nationally recognized investment fraud law firm with offices in Boca Raton, Florida and Austin, Texas, has recovered millions of dollars for investors burned by structured notes and structured products. We work on a contingency basis, which means we only get paid if we recover money for you. Call 1-888-885-7162 for a free case review.
What structured notes are and why they cause losses
Structured notes are hybrid financial instruments created by major banks and brokerage firms. Each note combines a debt component, usually a zero-coupon bond, with one or more derivatives tied to an underlying asset. That asset might be a stock index like the S&P 500, a commodity like crude oil, or a basket of securities. The payoff you receive at maturity depends on how that underlying asset performs during the life of the note.
Between 2019 and 2023, banks issued more than 11,000 structured notes in the United States alone, totaling over $122 billion in sales according to Bloomberg data. UBS, JPMorgan, Goldman Sachs, Morgan Stanley, and Citigroup dominate this market. These issuers package complex derivatives into products that appear safe on the surface but carry significant hidden risks.
The appeal for conservative investors is obvious. Structured notes frequently advertise features like “principal protection,” “buffered downside,” or “enhanced yield.” A broker might tell you that your money is protected up to a certain percentage even if the market drops. What the broker may not explain is that principal protection typically applies only at maturity, meaning your money could be tied up for five to seven years. If you need the cash earlier, you may have to sell on a thin secondary market at a steep discount. Even so-called principal protected notes expose you to issuer credit risk. If the issuing bank fails, as Lehman Brothers did in 2008, you could lose your entire investment.
The most common types of structured notes
Not every structured note works the same way. Understanding the specific product type that caused your loss is the first step toward recovery. Here are the most common categories we encounter in arbitration cases.
Autocallable notes
Autocallable notes, sometimes called callable notes, offer high coupon payments, sometimes in the range of 8 to 12 percent annually, as long as the underlying asset stays above a predetermined barrier level. If the asset drops below that barrier, the income stops. If the asset continues to fall, the note can be called early, often locking in a loss. Brokers frequently recommend autocallable notes to retirees seeking income, without adequately explaining the call risk or the barrier mechanics. Our firm is currently handling multiple autocallable note cases involving Stifel Financial, Morgan Stanley, and other major firms. Read our autocallable notes guide to learn more.
Principal protected notes
Principal protected notes promise to return your full initial investment at maturity regardless of market performance. That sounds like a guarantee. It is not. Principal protection applies only if you hold the note until maturity, which may be five, seven, or even ten years away. If the issuing bank fails during that period, your principal is at risk. Additionally, the upside is typically capped. You might earn only 60 percent of the index gains while bearing 100 percent of the downside if the protection threshold is breached. Learn about the hidden risks of principal protected notes.
Equity-linked notes
Equity-linked notes tie your return directly to the performance of one or more stocks or indices. The appeal is leveraged upside exposure without owning the underlying equities. The risk is that your return can be zero or negative if the market falls, and the leverage typically works in one direction only. If the index drops 30 percent, you may lose 30 percent. If it rises 30 percent, you might earn only 15 percent because of the participation rate. We have recovered losses for investors who were told equity-linked notes were a “conservative way to participate in the stock market.” Our equity-linked notes guide breaks down the mechanics.
Reverse convertibles
Reverse convertibles offer above-market coupon payments but contain a hidden trap. If the underlying stock drops below a certain level, the issuer can convert your note into shares of that stock instead of returning your cash. This means you could end up owning stock that is worth far less than your original principal. We have seen cases where investors seeking steady income were placed into reverse convertibles backed by volatile individual stocks. These products are almost never suitable for conservative portfolios.
Market-linked CDs
Market-linked certificates of deposit combine a traditional CD with an equity or commodity index. Unlike standard CDs, they are not FDIC insured on any gain component beyond the principal. The participation rate is usually low, meaning you capture only a fraction of the index upside. The market-linked CD may look like a bank product, but it functions like a structured note with the same liquidity and valuation problems.
How brokers misrepresent structured notes to investors
The structured notes market depends on brokers who can sell these products to retail investors. The commissions on structured notes are substantial, often two to four percent of the principal amount. That creates a powerful incentive for brokers to recommend structured notes even when the product is unsuitable for the investor’s risk tolerance, age, or financial goals.
Here are the most common misrepresentations we see in our cases.
Calling a risky product “safe” or “conservative”
Brokers routinely describe structured notes as safe, conservative, or comparable to bonds. They are not. Structured notes contain derivatives, leverage, call features, and issuer credit risk that bonds do not have. A sixty-five-year-old retiree with a moderate risk profile should not be placed into an autocallable note tied to a volatile commodity index.
Failing to explain liquidity risk
Most structured notes cannot be sold before maturity without taking a loss. The secondary market for structured notes is thin. If you need emergency cash, you may have to sell at 70 or 80 cents on the dollar. Brokers rarely mention this until the investor asks to sell.
Hiding the true cost
The fees embedded in structured notes are often not visible as a line item on your statement. Instead, they are built into the participation rate, the cap, or the barrier level. A note might give you only 60 percent participation in the S&P 500 while charging an implicit fee of 3 to 5 percent per year. The investor never sees that fee explicitly disclosed.
Concentrating a portfolio in structured products
FINRA rules prohibit over-concentration in any single investment type. Yet we frequently see portfolios with 40, 60, or even 80 percent of assets in structured notes and structured products. This concentration magnifies the call risk, issuer credit risk, and liquidity risk. It also violates the broker’s duty to recommend suitable investments.
How a structured notes lawyer can help you recover losses
If you lost money on structured notes, you have several paths to recovery depending on the facts of your case. A structured notes lawyer will review your account statements, trade confirmations, and the prospectus or offering documents for each product. Then we identify which legal claims apply.
FINRA arbitration claims
Most brokerage agreements contain a mandatory arbitration clause requiring disputes to be resolved through FINRA arbitration rather than court. FINRA arbitration hearings are faster and less expensive than litigation, but they require specialized knowledge of securities law and arbitration procedures. Haselkorn & Thibaut has filed and won hundreds of FINRA arbitration claims on behalf of defrauded investors.
Broker negligence and unsuitability claims
Brokers have a legal duty to recommend only investments that are suitable for the investor’s profile. This duty includes considering the investor’s age, income, net worth, risk tolerance, investment objectives, and liquidity needs. When a broker places a retiree into autocallable notes or reverse convertibles, that may constitute unsuitability. You can recover the full amount of your losses plus interest and attorney fees.
Fraud and misrepresentation claims
If your broker made false statements about a structured note, failed to disclose material risks, or concealed the true nature of the product, you may have a fraud claim. Fraud claims can result in punitive damages in addition to compensatory damages.
Failure to supervise claims
Brokerage firms are responsible for supervising their brokers and detecting unsuitable recommendations. If a firm ignored red flags in your account, such as excessive concentration in structured notes or repeated margin calls, the firm itself may be liable.
Class action and mass tort recovery
When a structured note product fails across multiple investors at the same firm, we may be able to pursue collective recovery. This approach lowers the cost per investor and increases leverage in settlement negotiations. Our structured products loss recovery guide outlines nine specific recovery paths.
Why investors choose Haselkorn & Thibaut
We are not a general practice law firm. We focus exclusively on investment fraud, securities arbitration, and brokerage misconduct. That focus means we understand the structured notes market, the firms that issue these products, and the arbitration panels that decide these cases.
- We have recovered millions for structured note investors, including a $2.4 million arbitration award against Stifel Financial and an $850 thousand settlement in a separate Stifel structured notes case.
- We represent clients nationwide from our offices in Boca Raton and Austin. We handle cases in every FINRA arbitration venue.
- We work on contingency. You pay no legal fees unless we recover money for you.
- We offer free case reviews. Call 1-888-885-7162 to speak with an attorney today.
Frequently asked questions about structured notes
What is a structured note?
A structured note is a debt instrument issued by a bank that combines a bond with one or more derivatives. The return you receive depends on the performance of an underlying asset such as a stock index, commodity, or interest rate. Structured notes are often marketed as safe or conservative investments, but they carry significant risks including liquidity risk, issuer credit risk, and embedded leverage.
Are structured notes safe?
Structured notes are not safe in the way most investors understand that term. Even so-called principal protected notes expose you to issuer bankruptcy risk and typically require you to hold the investment to maturity, which may be five to ten years. If you need to sell early, you will likely take a loss due to thin secondary markets. The 2008 financial crisis demonstrated that these products can fail catastrophically when issuers collapse.
Why did my structured note lose money when the market went up?
This happens when your note includes a call feature, a barrier level, or a capped participation rate. In an autocallable note, for example, the issuer can redeem the note early if the underlying asset stays above a barrier. That redemption may lock in a loss if the barrier was breached earlier. In equity-linked notes, the participation rate might be only 60 percent, meaning the stock index rises 20 percent but your note rises only 12 percent, while the fees eat away any gain.
Can I sell my structured note before maturity?
You can try, but the secondary market for structured notes is extremely limited. Most issuers will quote you a bid price that includes a steep discount, often 10 to 30 percent below the stated value. Brokers who sold you the note may refuse to buy it back. If liquidity was important to you at the time of purchase, recommending a structured note may have been unsuitable.
What should I do if my broker recommended a structured note I did not understand?
Contact a structured notes lawyer immediately. You have a limited time to file a FINRA arbitration claim, typically six years from the date of the transaction. The sooner we review your account, the better we can preserve evidence and identify the specific misrepresentations or suitability violations that occurred. Call 1-888-885-7162 for a free case review.
How long does a structured notes arbitration case take?
Most FINRA arbitration cases involving structured notes resolve within 12 to 18 months from filing. The timeline depends on the complexity of the products, the number of brokers involved, and whether the brokerage firm settles before hearing. We aim to resolve cases as quickly as possible while maximizing recovery.
What does it cost to hire a structured notes lawyer?
Haselkorn & Thibaut works on a contingency fee basis for structured notes cases. You pay no upfront legal fees. We only collect a fee if we recover money for you through settlement or arbitration award. The initial case review is free.
What can I recover in a structured notes case?
You may recover the full amount of your losses plus interest, attorney fees, and in some cases punitive damages. The amount depends on the strength of your claims, the broker’s conduct, and the brokerage firm’s willingness to settle. In our experience, structured notes cases frequently settle for 60 to 100 percent of documented losses, depending on the facts.
Speak with a structured notes lawyer today
If you lost money on structured notes, autocallable notes, equity-linked notes, principal protected notes, or any structured product, we can help. The consultation is free, the case review is thorough, and we only get paid if we recover money for you.
Call 1-888-885-7162 now or fill out our online contact form to speak with a structured notes lawyer. Time limits apply to FINRA arbitration claims, so do not wait to protect your rights.
Related resources
Our firm has published detailed guides on every major structured note type and recovery strategy. Explore the resources below to learn more about your specific situation.
- Investor guide on structured notes and structured products — A comprehensive overview of how these products work, what risks brokers fail to disclose, and how to protect yourself.
- Autocallable notes guide — Everything you need to know about autocallable notes, the barrier mechanism, call risk, and how investors lose money.
- Structured products loss recovery options — Nine distinct paths to recover your losses, from FINRA arbitration to class action litigation.
- Equity-linked notes explained — How participation rates, caps, and leverage create hidden losses.
- Principal protected notes risks — Why “principal protection” is not a guarantee and how issuers use it to mask risk.
- Hidden risks of structured notes — The warning signs your financial advisor should have disclosed before selling you structured notes.