FINRA sanctions Trident Partners LTD for Violations Relating to Sale of Steepeners
The Financial Industry Regulatory Authority Inc. has censured Trident Partners LTD and fined it $50,000 for supervisory system violations relating to the sale of steepeners.
In a letter of acceptance, waiver and consent, FINRA said that from January 2010 until January 2012, Trident failed to establish, maintain and enforce a reasonable supervisory system and written supervisory procedures (WSPs) to ensure that the recommendations of its sale of steepeners, a complex, structured product were suitable.
Also during the relevant period, Trident permitted the recommendation of steepeners without registered representatives having a reasonable basis to make such recommendations. The sale of steepeners became a significant part of the firm’s business during the relevant period. There were approximately 1600 customer transactions involving steepeners, which resulted in 10% of the firm’s commissions.
For FINRA’s full findings see FINRA Case # 2012030775201.
Risks of Steepeners
A steepener is a type of structured product which allows investors to bet on the shape of the yield curve. The return on this type of product is linked to the spread between longer- and shorter-term interest rates—that is, the so-called steepness of the curve. For example, the return on one widely available product increases when the yield curve steepens and decreases when the yield curve flattens.
Steepeners can be appealing to investors chasing return because some of these products have initial fixed interest rates that are high, and these products are often principal protected, but they do have their drawbacks. The fixed rates often convert to floating rates that typically change in concert with the steepness of the yield curve, as described above, so your return can vary or fall over time. Moreover, they usually have longer maturities, the secondary market for these products may be illiquid and they are often callable.
This information, which is publicly available on FINRA’s website has been provided by The White Law Group.
If you have questions about investments you made with Trident Partners LTD, the securities attorneys of The White Law Group may be able to help you. To speak with a securities attorney, please call 888-637-5510.
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