Wall Street has been selling what one lawyer calls a "mind-numbingly complex" deal to retail investors for years, but now, it may come back to bite big banks.
Bank of America's brokerage arm, operated by Merrill Lynch, has a growing number of investors suing it for a volatility-focused structured product which charged double-digit fees as it lost retail buyers millions, one lawyer said. Now, according to a report in The Wall Street Journal, Merrill's Strategic Return Notes, which it sold to retail investors years ago, has also earned the bank a potential Securities and Exchange Commission civil enforcement action after whistleblowers turned on their former employer.
The whistleblowers, a pair of Merrill Lynch brokers who sold the volatility structured product beginning in 2010, taped conversations with other bank staffers before tipping off investigators. All in all, Merrill clients lost most of their investments in a $150 million fund.