What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: July 17, 2022

Stoltmann Law Offices, P.C. is a Chicago-based securities and consumer protection law firm offering nationwide representation to investors and victims of fraud nationwide on a contingency fee basis.  Recently, we were contacted by an investor/client who was sold a basket of structured notes offered by RBC Capital. He’s a retired investor and believed what he was sold was suitable, offered a stable and fairly high interest rate, which was important because he is on a fixed income, and that the note had down-side protection.  He was made to believe these important facts because his trusted financial advisor pitched these products to him this way. In reality, the structured notes he was sold were speculative, extremely complicated, conflicted proprietary products.

The investment at issue is called the:

Auto-Callable Contingent Coupon Barrier Notes Linked to the Common Stock of Teladoc Health, Inc., Due July 3, 2024

What a name! As an aside, whenever your broker tries to sell you something with a name like this, the smart thing to do would be to find another broker. This doozy is a security cooked-up in the back room of RBC bank by analyst quants whose purpose in life is to manufacture securities that their brokers can sell to their clients and make money from it. This one is a “structured note” backed by the common stock of Teladoc Health. It was issued in December 2021 – the peak of Teladoc’s share price as timing would have it – and offered investors a non-guaranteed 8.15% interest rate payable quarterly.  Since Teladoc Health’s stock price has cratered since December 2021, this note is currently down about 75%.  And to think RBC categorizes this product as an “income note”.

There is nothing “principal protected” about this note. It is callable by RBC if the stock price goes OVER the issue price by certain dates, so basically you as the investor really won’t participate in any upside if Teladoc stock were to take off instead of crater. Worse yet, if the stock price sinks, at maturity, you will get a haircut on your principal investment by whatever amount the stock decreases.  And if the stock falls more than 40%, RBC stops paying the interest on the note! Heads RBC wins, Tails you lose.  This is all explained in the most complex and convoluted terms in the issuing prospectus, most would need at least a year of college level calculus to have a clue how this investment actually works.

Why does RBC, and every other big-bank on Wall Street, sell these complicated structured products? They make a killing on them, that’s why. On this specific note, RBC gets paid 2.25% of the principal invested as underwriting fees and sales commissions. Multiplied across billions of dollars raised in hundreds of similar offerings, where the bank takes no risk and offloads the risk of its prop-trading onto the income-seeking investor, it makes great Wall Street business sense.

Notes like these are created to add profits to the ledgers of banks like RBC and Bank of America Merrill Lynch, and Morgan Stanley. If you invested in one of these structured notes and question whether it was suitable for you, you have rights and can pursue a claim through FINRA arbitration to recover your losses.  Please contact Stoltmann Law Offices at 312-332-4200 for a consultation with an experienced securities lawyer.


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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