Bonds are typically seen as relatively stable investments that have a reliable return both brokers and investors can depend on as portfolios are built and managed. However, when junk bonds are recommended and invested in, the investor loses and the broker commits financial fraud.
If you suspect recommendations for and investment of your money into a junk bond harmed you financially, you need an experienced attorney willing to seek FINRA arbitration. The attorneys at Oakes & Fosher are familiar with the ins and outs of securities misconduct litigation and are willing to provide representation for investors that have experienced stock broker misconduct. We fight for victims of junk bond scams and seek recompense for damages.
What Are Junk Bonds?
Junk bonds are non-investment grade bonds that are seen as high-risk and high-yield, meaning the outcome of investing in them is uncertain, but if they perform well, the investment pays off and often in a short period of time. Junk bonds have some common traits that lead to them being called “junk,” such as:
- Having formerly been favorable bonds that are now downgraded
- The bond is sold as undervalued and could yield high returns once its rating is upgraded
- Many junk bonds are issued to fund higher risk operations of energy and commodity companies
- The junk bond has a non-investment grade, meaning the three rating companies (Moody’s, Standard & Poor’s, and Fitch) have concluded that the bond have low investment quality, usually having ratings of B or Ba or lower.
When you are able to review your investments and something like a junk bond comes to your attention, it is fair for you as the investor to scrutinize it and determine whether or not you have been misled.
Junk Bond Losses
The problem with junk bonds is that they often lead to a large loss of money, especially among older investors who might need a more conservative investment strategy, thus experiencing elder fraud at the hands of an unscrupulous broker.
Junk bonds, along with elder fraud, are one of many types of investment fraud that investors could experience when working with a broker-dealer, including:
- Ponzi Schemes
- Excessive 401(k) Fees
- Non-Traded REITs
- EB-5 Investment Fraud
- Failure to Supervise
- Variable Annuities
- Structured Notes
- Unsuitable Recommendations (Suitability)
- Negligence/Failure to Disclose Risks
- Over-concentration of Assets
If junk bonds or other types of investment fraud sound like something you are experiencing, it is prudent you seek legal representation right away in order to receive compensation for damages.
Red Flags for Junk Bond Investors
If you are exploring bonds and concerned one or several of them might be junk bonds, look for some of these signs:
- The investment involves a country with a failing or failed economy. For example, Puerto Rican bond lawsuits were once a big part of investment fraud litigation because investors put money into bonds from Puerto Rico that eventually did not give them a return on their investment.
- The company issuing the bonds does not recover financially and/or goes into bankruptcy.
- The bond purchased defaults or does not recover value.
- The returns from the bond are higher than normal.
If these red flags sound familiar or other characteristics of junk bonds align with something you might have experienced or are currently experiencing, know there is a limited time to seek recompense for damages done to this risky investment. An attorney experienced in securities arbitration can help.
Junk Bond FAQs
Is investing in junk bonds always a bad idea?
Some investors might see junk bonds, which are usually high-risk/high-reward, as worth trying for short periods in order to gain more money within that time period versus sticking to only long-term investing. If you are risk averse or are seeking a conservative investment strategy with low risk, trying this strategy is not usually wise. However, it is best to seek help from a financial planner, attorney, or other professional before changing strategies or adopting new ones with your investment.
When can a junk bond be an unsuitable investment for me?
Every investor is different and has different needs and goals. It is important to speak with a financial planner, a broker-dealer, or an attorney who understands the risks of investing in junk bonds before making any important decisions about this type of investment. Retirees, investors who do not want to seek high-risk investments, and those with goals that include long-term strategies might not be suited to take on risky investments such as junk bonds.
What kind of arguments can an investment fraud attorney make when filing a claim relating to how investing in junk bonds has harmed you financially?
If you have lost money from investing in junk bonds, you can seek recompense with the help of an attorney using arguments such as that the investment was unsuitable; the stockbroker or brokerage was negligent in suggesting and managing the junk bond; and there was breach of fiduciary duty.
How can I recover losses from junk bond investment?
Seek help from an investment fraud lawyer to recover losses relating to investment in junk bonds.
Contact Our FINRA Arbitration Attorneys
If you have invested in junk bonds, or suspect a broker-dealer advised you to invest in bonds that ended up being “junk,” you should seek legal action. The stock broker fraud attorneys at Oakes & Fosher can help you recover your lost investments through arbitration processes under FINRA. Contact us today to receive a free and confidential consultation.