Written by The White Law Group• June 21, 2023• 3:49 pm• Blog, Current Investigations

Comerica Inc. Contingent Interest Notes, sponsored by JP Morgan Chase

The White Law Group is investigating potential claims involving Contingent Interest Notes Linked to the Common Stock of Comerica Incorporated due April 4, 2024.

Comerica Inc. Contingent Interest Notes, sponsored by JP Morgan Chase, is a complex investment product. You could lose all of your investment.

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Contingent Interest Notes – Complex Investment Product

According to the prospectus, investors should be willing to accept the risk of losing some or all of their principal and the risk that no Contingent Interest Payment may be made with respect to some or all Review Dates. Investors should also be willing to forgo fixed interest and dividend payments, in exchange for the opportunity to receive Contingent Interest Payments.

Understanding Contingent Interest Notes

Here’s an explanation of the key characteristics of these Comerica Inc. Contingent Interest notes (structured notes):

The notes are designed for investors who seek a Contingent Interest Payment with respect to each Review Date for which the closing price of one share of the Reference Stock is greater than or equal to 40.00% of the Initial Value, the Interest Barrier.

What does it mean?

Contingent interest notes are a type of financial instrument or debt security that carries an interest rate which is contingent or dependent on the occurrence of a specific event. Unlike traditional fixed-rate notes, where the interest rate remains constant throughout the life of the note, contingent interest notes have interest rates that vary based on predetermined conditions.

The interest rate on these notes is tied to the occurrence of specific events. These events can vary depending on the issuer’s and investor’s preferences, but common examples include changes in the issuer’s financial performance, fluctuations in certain market indices, or other predetermined triggers. The interest rate may also be contingent on specific events happening in the broader economy, such as changes in interest rates set by central banks or other macroeconomic indicators.

When the specified contingency is triggered, the interest rate on the contingent interest note will be adjusted accordingly. If the triggering event is positive for the issuer or economy, the interest rate may increase, providing higher returns to investors. Conversely, if the event has a negative impact, the interest rate may decrease, potentially reducing the returns.

The contingent interest feature introduces an additional level of risk and uncertainty compared to traditional fixed-rate notes. As an investor, you are exposed to the potential fluctuations in interest rates, which can impact the overall return on your investment. These notes may be more appealing to investors seeking potentially higher returns but are also willing to accept the added risk.

Like other debt securities, contingent interest notes have a specific term and maturity date. The term refers to the period during which the note is outstanding, while the maturity date marks the end of the term when the principal amount is repaid to the investor.

What are the Risks Associated with Comerica Inc. Contingent Interest Notes?

There are several risks to consider when investing in structured notes, and it’s important to take the time to conduct research and understand those risks to avoid financial losses. Those risks could include the performance of the notes, and how they’re directly linked to the least performing common stock within a group of stocks. If the chosen common stock performs poorly during the specified period, it can lead to a reduction or negative return on the notes. Market volatility and changes in the stock’s price can impact the overall performance of the notes.

These notes are typically issued by financial institutions, so investors face the credit risk of the issuer. If the issuer experiences financial difficulties or defaults, investors may face a loss of principal and interest payments. Further, the auto-call feature in these notes gives the issuer the option to redeem the notes early if certain conditions are met. If the notes are called early, investors may miss out on potential future interest payments or potential gains if the underlying common stock continues to appreciate.

The additional interest payments are contingent upon specific conditions being met, which are typically tied to the performance of the underlying common stock. If the conditions are not satisfied, investors may not receive the enhanced interest payments, and their returns could be lower than expected.

In addition, investing in a single common stock, even if it is the least performing among a group, exposes investors to stock-specific risk. Factors such as company performance, management decisions, industry trends, and external events can impact the stock’s value and, consequently, the performance of the notes.

Investigating Potential Claims

The White Law Group is investigating the liability that brokerage firms may have for recommending complex, often extremely high-risk, structured notes such as Comierca Inc. Contingent Interest Notes. Investors should carefully assess these risks, review the offering documents, and seek advice from a financial professional to determine if auto callable yield interest notes linked to the least performing common stock align with their investment objectives and risk tolerance. It’s essential to have a clear understanding of the potential risks and rewards before making investment decisions.

Brokers often pitch structured products, as providing “downside protection” against losses to a related index while allowing modest upside gain potential. Of course, this is only true if the value of the index doesn’t fall below a predetermined price. If the price falls below that point, the losses in structured notes can still be huge. These products typically pay a high fee to the financial advisors that sell them.

Brokerage firms have two main duties in recommending structured callable notes linked to equity investments or indexes. First, brokerage firms are required to perform adequate due diligence on any product they recommend. Second, brokerage firms are required to ensure that all recommendations made are suitable for their client considering the client’s age, investment experience, net worth, income, and investment objectives.

If a brokerage firm fails to do either of these things, the firm can be held responsible in a FINRA arbitration claim.

Do I Need a Securities Fraud Attorney?

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.

With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment, and financial business transactions attempt to recover their investment losses. The firm reviews securities fraud cases throughout the country.