Tenet issues alert on structured products from AIG and Lehman Bros

Tenet has warned advisers to avoid structured products backed by Lehman Brothers or AIG.  

The IFA network sent out the guidance bulletin to 2,500 of its investment advisers earlier this week warning them to avoid certain structured products backed by insurer AIG and bankrupt bank Lehman Brothers. Tenet warned about various structured products provided by NDF and Arc, whose investment plans are backed by the failed US bank.  

‘It was really a guidance bulletin on the situation with Lehman’s and the implications for the structured product market,’ said Keith Richards, Tenet group development director. ‘We employ research people who stay on the pulse so we can send guidance like this out to IFAs – it will allow advisers to make an informed choice about these products.’ 

Richards said the worst case scenario for clients with structured products was losing their entire investment but it was more likely for the products not to deliver the returns promised.  

Tenet said clients invested in Enhanced Returns issue 6 and Kick Out Performance Plan issue 2, the two plans approved for use by members would not be covered by the Financial Services Compensation Scheme because the product issuer was not insolvent. Lehman’s acted as the hedge provider for the issuer Defined Returns Limited. Tenet said it was waiting to hear from Defined Returns Limited what would happen to clients’ cash.

The investment date for both plans was meant to be 10 October, in the mean time clients’ cash should have been kept on deposit. Clients who signed up for the plan in the last 14 days can still cancel the investment.