WASHINGTON, June 22 /PRNewswire/ -- Securities Litigation and Consulting Group, Inc. ("SLCG") this morning released a structured products research report entitled "What TiVo and JP Morgan teach us about Reverse Convertibles." The report's primary authors are Geng Deng, Ilan Guedj, Craig McCann, Edward O'Neal, Sherry Liu and Guohua Li. Dr. Guedj, Dr. McCann and Dr. O'Neal are former professors and currently principals of SLCG. Dr. McCann and Dr. O'Neal are former SEC economists. Dr. Geng and Dr. Liu are Senior Financial Mathematicians and Dr. Li is a Senior Financial Economist at SLCG.
The SLCG study explains that reverse convertibles are short term, unsecured notes issued by brokerage firms including JP Morgan, Barclays, Citigroup, Morgan Stanley, Wachovia, Lehman Brothers, and RBC that pay less than the notes' face value at maturity if the price of the reference stock or the level of the reference stock index declines substantially during the term of the note. The SLCG study finds that brokerage firms overcharge for reverse convertibles so significantly that the expected return on these complex investments is actually negative and that reverse convertibles continue to be sold at inflated prices only because investors do not fully understand these products.
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. The study illustrates its main themes with JP Morgan's May 14, 2010 TiVo-linked reverse convertible.
SLCG's reverse convertible paper and other working papers are available at http://www.slcg.com/research.php.
Securities Litigation and Consulting Group, Inc. ("SLCG") is a financial economics consulting firm based in the Virginia suburbs outside of Washington, DC. SLCG provides consulting services and expert witnesses to law firms, publicly-traded corporations, banks, brokerage firms and individuals involved in complex litigation throughout the United States. SLCG's staff includes PhD, MA and BA level professionals with academic, industry and government experience. Its experts have testified in state and federal court and in various arbitration forums.
SOURCE Securities Litigation and Consulting Group, Inc.