MIAMI, June 24, 2016 (GLOBE NEWSWIRE) -- Sonn and Erez, PLC, is investigating claims against Merrill Lynch, who sold Strategic Return Notes (“SRNs”). Strategic Return Notes have performed very poorly as these $10 notes fell to fifty cents, resulting in a 90% loss to investors. Merrill Lynch offered and sold approximately $150 million of these volatility notes to approximately 4,000 retail investor accounts in 2010 and 2011. SRNs of Bank of America Corporation (“BAC”) are complex notes that do not pay interest but promise investors a variable return based upon the performance of the Investable Volatility Index (“VOL”).
On June 21, The Wall Street Journal reported in “SEC Probes Notes Issued By Merrill,” that Merrill Lynch financial advisors did not understand the “roll risk” costs involved in the notes. “The roll costs are far larger than we ever understood or were disclosed to us,” Merrill broker Glen Ringwall said, according to the transcripts of the calls he taped with colleague Mark Manion--“This is borderline crooked.”
On June 23, 2016, Merrill Lynch settled charges by the SEC that it misled its customers by failing to adequately disclose a fixed, regularly occurring cost included in its proprietary volatility index knows as the “Execution Factor” that added an extra 1.5% charge on the Index each quarter (an extra 6% per year).
The SEC charged that Merrill Lynch did not adequately disclose the Execution Factor charges of 1.5% per quarter, 6% per year, which increased the cost, or level, of each unit of forward implied volatility being purchased as part of that day’s rebalancing.
In its Findings of Fact, the SEC Order Instituting Cease and Desist Proceedings (File 3-17314) found that “Merrill Lynch’s failure to adequately include the Execution Factor rendered the cost disclosures relating to the fixed 2% sales charge and 0.75% Index Adjustment Factor materially misleading.”
Merrill Lynch agreed to pay a fine of $10 Million to the SEC to settle charges. But, as Jeff Sonn, Esq. of Sonn and Erez noted, “customers must sue Merrill Lynch to recover their losses because the $10 Million collected by the SEC under the settlement is not going to the Merrill Lynch customers. The SEC is keeping that fine.” Further, “the SEC Order included Findings of Fact that can be used by customers in cases against Merrill Lynch to recover their investment losses,” Sonn added.
As a result, Sonn said, customers should hire counsel and file claims in arbitration to recover their losses.
What Investors May Do
If you would like to discuss your legal rights and whether you can recover your losses from any structured notes or other investment sold to you, you may, without obligation or cost to you, email Jeff Sonn at jsonn@sonnerez.com or Jeff Erez at Jerez@sonnerez.com or call the law firm toll free at 866-372-8311, or fill out a contact form on www.sonnerez.com.