Corporate & Securities Law

Preferred Stock Losses: You Have Options

By Steven Caruso

Preferred stock losses in Fannie Mae, Freddie Mac, Lehman Brothers, and other fiscally troubled companies have cost investors dearly over the past two years. Preferred shares generally are considered more conservative, low-risk - investments especially attractive to retirees seeking predictable income via dividends. In many cases, however, the supposedly ?low-risk? preferred stocks sold to investors turned out to be highly volatile because of the financial health of the issuing companies.

Many investors had been told by their brokerages and financial advisers that preferred stocks were a safe and secure investment. As a result, they purchased large concentrations ofcertain preferreds, including those like Fannie Mae and Freddie Mac. In the case of the nation?s two biggest mortgage lenders, investors believed they had built-in protection. If either company failed, their investment principal would fall under the protection of the federal government.

Or so they thought.  It didn’t turn out that way, of course. When the government placed the two companies into conservatorship, investors holding preferred and common shares were essentially wiped out, leaving them with huge financial losses and not the “safe” and “predictable” income they had been told to expect.

If you?ve experienced substantial investment losses because a brokerage or financial advisor misrepresented the risks of Freddie Mac, Fannie Mae or other preferred stocks, please contact us. We can advise you regarding your legal options.

Full post as published by Representing Investors on December 10, 2009 (boomark / email).