Risks and Considerations

Complex products

Any product with multiple features that affect its investment returns differently under various scenarios is potentially complex. Although many of the added features may seek to reduce the probability of investment losses in particular situations, the addition of these features can greatly increase the complex nature of the investment. The fact that a product is “complex” indicates that it presents an additional risk to retail investors and adds a further dimension to the investment decision process.

Principal risk

Not all Structured Notes offer 100% principal protection. In some cases investors are exposed to the downside performance of the underlying assets, and therefore could lose some or all of their initial investment. Some notes do offer principal protection, but only if held to maturity and if the issuer is able to fulfill its obligation; if sold prior to maturity, the investor may receive less than their initial investment. Principal is not at risk from negative performance of the underlying asset, but is subject to issuer credit and default risk.

Limited return

Investors in some Structured Notes may never receive more than their initial investment in some notes regardless of how well the underlying asset did throughout the term of the investment. Therefore the return of the notes may be significantly less in comparison than the direct investment in the underlying asset.


Structured Notes are not designed to be liquid; they are intended to be held to maturity. While there may be a secondary market for Structured Notes, Issuers are under no obligation to maintain one. Selling prior to maturity carries with it the risks inherent in factors that can affect marketability, such as volatility of the underlying assets, interest rate swings, and developments affecting the underlying securities.

Creditworthiness of the Issuer

The extent to which any principal is protected is subject to the quality of the Issuer’s credit. Structured Notes are subject to the risk that the Issuer might not be able to meet scheduled interest or principal payments. The investor should investigate the creditworthiness of the Issuer to evaluate its ability to meet the terms of interest and principal payment. For certificates of deposit of FDIC-insured banks or savings institutions, the investor’s principal is protected up to $250,000 per depositor per insured bank. In addition, certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank. For more information please visit www.FDIC.gov.

Issuer call

Some Structured Notes are callable by the issuer, meaning the issuer (not the investor) can choose to call in the notes and redeem them before maturity. An early call prior to maturity may put the investor at risk of reinvesting in a lower interest rate environment. The call price is generally par (100% of principal), but in some cases it can be above par (“premium call”).


For full information regarding the tax consequences of Structured Notes, investors should consult their tax advisor. In the case of 100% Principal Protected Notes, while interest is not paid until maturity or the call date, interest on Principal Protected Notes may be subject to the OID (Original Issue Discount) tax based on the interest rates for similar investments issued at a similar time. For the purpose of reporting tax information, the applicable comparable rate is specified in the disclosures.

Cost of ownership

Structured Products may have costs of ownership, such as brokerage fees. Investors should consult their advisor for information on any costs or fees.