Risk Considerations

This section describes some of the risk considerations that should be evaluated with respect to structured investments. While we have attempted to compile a general overview, this should by no means be considered a complete list of all possible risks associated with the multitude of structured investments that are currently available in the marketplace.

Among the risks involved in owning structured notes and CDs, these are often mentioned:

• Risk of Loss: There is a risk of loss when investing in structured products and investors could lose the entire amount of their investment. 
  
• Complex Payout Structures: The payout structures for each product vary and are often complex. 
  
• Secondary Market Risks: There is liquidity risk when selling prior to maturity, as there may not be a liquid secondary market for the product.  Additionally, the value of the investment may be worth less than the initial investment, irrespective of the structured payout at maturity.
  
• Legal and Tax Considerations: There are legal risks involved with holding complex instruments, as regulatory and tax considerations may change during the term of the investment.
  
• Fees:  Investors should refer to the relevant offering documents for additional details regarding the fees and built-in costs, including information regarding how fees will reduce return on investment.  Investors should also consider other fees that may be charged by financial professionals, including management fees, sales charges or commissions. 
  
• Counterparty Considerations: 
• Credit Risk - The creditworthiness of an issuer must be considered when investing in a principal protected or non-principal protected notes, as structured notes are not guaranteed by the government, the underwriter or any other entity.  A structured product represents an unsecured obligation of the respective issuer.  
• Bankruptcy Risk - An investor faces the risk of not receiving any payment on its investment if the relevant issuer files for bankruptcy or is otherwise unable to pay its debts. 
  
• Complex Features and Underlying Securities Considerations:
• Market Risk -  The value of the structured investment may depend upon the value of the underlying index or security(ies).   Investors do not directly participate in the returns of the underlying index or security(ies).
• Income Risk -  Under certain structures, anticipated income may not be fixed or guaranteed and may be dependent upon the performance of an underlying index or security(ies).  Investors should review the offering documents to determine how distributions are calculated.
• Payout Features -  Depending upon the products structure, return at maturity may be in the form of a pre-determined number of shares in the underlying stock, rather than cash, and may be based on the performance of the underlying security(ies) or index.  The market value of those shares may be substantially less than the principal amount of the notes and in certain cases may be zero.  In some structures, investors may not participate in all or even a portion of any increase in value of the underlying security.  Investors should review the offering documents to determine how the return on the structure is calculated.  
• Call Features -  Structured notes may have early redemption rights for the issuer of the security, which if exercised would result in a required redemption prior to maturity and loss of any remaining coupon payments.  It is likely that an early call by the issuer will be to the issuer’s advantage and to the disadvantage of the investor.  In certain structures the call may occur automatically based on the performance of the underlying index or security.
• Foreign Currency Risks -  Investors may be exposed, directly or indirectly, to foreign currency risk due to any foreign currency(ies), securities or commodities that may be linked to the respective structured product. The prices of non-U.S. currencies, commodities or securities may be greatly affected by economic, financial, political, and social factors in the home country of the securities issuer, including but not limited to, changes in the country’s government, legislation, economic and fiscal policies, currency exchange laws or other laws.
• Past Performance is NOT indicative of Future Results - An underlying index (or security(ies)) can fall as well as raise.
  
• Other Considerations:  Structured products are complex financial instruments and product features may greatly vary from product to product.  Always thoroughly understand the product features and risks before investing and consult with a qualified financial professional and tax advisor.  As with any type of investment, prudent investors should diversify their portfolios with the assistance of a qualified financial professional. 
  
• Please note additional factors when determining risk/reward profiles of specific securities.