Chase Manhattan Bank, now part of JPMorgan Chase & Co., offered the first structured CD in 1987, the "Market Index Investment Deposit Account," winning approval from the late FDIC chairman William Seidman that the investment should be insured as a deposit.

The SEC and the Office of the Comptroller of the Currency agreed they were deposits, allowing banks to forgo registering them with the securities regulator.

UBS Fined

As many as 10 states are investigating how some of the investments are being marketed, according to Ronak Patel, co- head of a working group for the North American Securities Administrators Association and director of inspections for the Texas State Securities Board.

Finra has already been investigating other types of structured products, and it has fined brokerage firms for misleading investors about the safety of "principal-protected" notes.

UBS AG, Switzerland's largest bank, was ordered to pay investors $8.25 million and fined $2.5 million over sales of Lehman Brothers Holdings Inc. securities marketed as "100% Principal-Protection Notes" that became almost worthless after Lehman filed for bankruptcy in September 2008.

The payouts of the instruments may be too difficult for many individual investors to understand and buyers might receive yields closer to those on Treasuries rather than any outsized returns, according to Steve Swidler, a professor at Auburn University in Auburn, Alabama.

'Walked Off Mars'

Some would take him several lectures to explain to his class on financial engineering, such as an HSBC 10-year CD that pays 4.5 percent for the first year and then ties the yield for the remaining nine years to leveraged bets on interest-rate swaps, he said, a so-called "steepener" because it bets on the steepness of the Treasury yield curve.

"If I mention the yield curve to your typical customer, standing in line at a bank making a $100 deposit, and I ask them, 'What do you think about 2-year and 10-year spreads?' Swidler, who's written academic papers on the products, said in a telephone interview, "They'll probably look at me like I just walked off Mars."

Wells Fargo offered a 6.5-year CD tied to the S&P 500 Index last month that pays bankers and brokers a fee of as much as 8 percent, according to the CD's disclosure statement.

The CD returns the gains of the index if it doesn't increase by more than about 62 percent from its starting level. If it breaks the so-called "barrier," investors receive 2 percent annually, which has happened about 60 percent of the time, according to an analysis of more than 80 years of S&P 500 data by Bloomberg.

'Enhance Returns'