OTC Derivatives and Swaps

OTC derivatives and swaps are highly complex instruments that were once in the exclusive province of institutional trading desks but have been increasing used by financial firms to structure investments for high net worth individuals and family offices or businesses, leading to abuses in some circumstances. The often wide disparity in knowledge of these complex products between financial firms and investors to whom these products are sold can lead to investors being mislead about such products risks and how they actually operate. Unless a non-institutional investor has the “in house” capability to properly evaluate and monitor such products, they are for all practical purposes totally reliant on the financial firm that sells them the product for this information. Yet, the financial firms, while offering these investment vehicles to investors, will often unfairly treat the transaction with its customer as “arms length,” as if the counterparty, in the case of a swap, were another financial institution, rather than a non-expert investor.

Our Firm’s attorneys have extensive experience representing investors against financial firms in this emerging area of litigation and arbitration. The Firm presently represents a family office in a $383 million FINRA arbitration claim in New York against Citigroup Global Markets Inc. related to Citigroup’s misconduct with respect to the structuring, monitoring and handling of hedge fund and private equity portfolios, and the improper recommendation and implementation of a leveraged option swap transaction and a lender protected unit trust.

The Firm handled a $15 million dispute on behalf of a fuel and heating oil company against an international broker dealer related to the purchase of OTC derivatives, including swaps and options, pursuant to an ISDA agreement.