Reverse convertible securities (also called reverse convertible bonds, reverse convertible notes
, or revertibles) typically consist of a short-term promissory note issued by an investment bank such as Barclays or Societe Generale combined with a put option on an unrelated equity.
Some of the more significant cases involved the sale of collateralized mortgage obligations (five cases, $760,000 in total fines), closed-end funds (three cases, $1 million in total fines), and reverse convertible notes
(two cases, $710,000 in total fines).
The SLCG study reports that despite substantial overpricing in the offerings and the significant losses on the reverse convertible notes
in 2008 and 2009, there have been a substantial number of new issues of these dubious investments by JP Morgan, Barclays and many other brokerage firms in 2010.
WASHINGTON -- The Financial Industry Regulatory Authority (FINRA) today announced that it has fined the former Ferris, Baker Watts LLC, acquired by RBC Wealth Management, $500,000 for inadequate supervision of sales of reverse convertible notes
to retail customers as well as unsuitable sales of reverse convertibles to 57 accounts held by elderly customers who were at least 85 years old and customers with a modest net worth.
70% reverse convertible notes
series 26 due July 12, 2001, linked to the ordinary shares of Canon Inc.