Steckbeck was among 29 named investors whose arbitration claim made via Finra was withdrawn after Credit Suisse sued to block it, arguing that the buyers of TVIX notes didn’t fit the Finra definition of “customer,” court records show.
Credit Suisse dropped its case after the defendants withdrew the claim, according to court papers filed Dec. 20 in federal court in Baltimore.
The investors weren’t the bank’s customers because they didn’t buy the securities from Credit Suisse and never entered into an agreement to obtain investment advice from it, the lender said in the complaint. Sharp of Credit Suisse declined to comment on the court document.
Although ETNs are debt securities, they allow individual buyers, sometimes called retail investors, to track assets such as futures or options, financial instruments that may otherwise require certification that the purchaser is a sophisticated investor.
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Futures are contracts to buy or sell assets at a set price, allowing them to create a position, or a view, on the market. Options give the buyer the right, but not the obligation, to buy or sell a security at a set price.
“The whole point of making these things exchange-traded was to make them accessible to retail investors,” said Colbrin Wright, assistant professor at Brigham Young University in Provo, Utah, who has written academic articles on the indicative values of ETNs. “The majority of ETNs are overpriced, and about a third of them are statistically significant in their overpricing.”