The brokerage company JSC «First Heartland Jusan Invest» contacted the editorial board of the FBRK with a request to publish its point of view on the situation where depositors lost almost all of their funds invested in financial instruments that were actively recommended by the company's employees.
To remind, clients of «Jusan Invest» stated that they lost up to 90% of their investments. In 2021, they invested in structured notes, and in the spring of 2023, when the securities began to lose value significantly, depositors were unable to withdraw their assets due to a technical glitch in the brokerage company's mobile application.
They now intend to recover the lost funds, as they believe they were misled, having been presented with what was supposedly an 'ideal option' for investment. Earlier, the depositors contacted the Financial Market Regulation and Development Agency (FMRDA), which conducted an audit of «Jusan Invest» and identified a number of serious violations.
Meanwhile, at «Jusan Invest» they do not see themselves at fault for investors losing millions by investing in structured notes. In its official commentary, the company clarified certain points regarding this situation.
As we have previously noted, «Jusan Invest» positions itself as a professional participant in the securities market, not a second-tier bank. The company states that it provides brokerage services, accepting client orders and executing them in accordance with the terms of the transactions.
The nature of investment products implies the possibility of both generating income and incurring losses, reminds «Jusan Invest». It is reported that clients of brokerage companies are informed about investment risks at the time of signing individual brokerage agreements.
FBRK’s note: It is worth recalling that the FMRDA established that clients of «Jusan Invest» were, in fact, not properly informed about how structured notes work and what they are.
However, the company is convinced that clients should have themselves been aware of the risks of investment, given the high interest rate of this financial instrument (up to 20% per annum in foreign currency).
«A structured note is a security whose value depends on the performance of the shares comprising it, the so-called underlying assets (typically 3 to 5 shares). According to the product's terms, if the price of at least one of the shares falls by 35-50%, the note begins to be revalued in line with that share», explained representatives of «Jusan Invest».
Representatives of the brokerage company also reminded that since 2021, the international stock market has experienced 'a period of turbulence amid an inflation spike' in developed countries. It is noted that today the situation has 'to a certain extent improved', which has positively impacted shares and, consequently, structured notes.
«Not all structured notes have fallen in price; many securities have allowed investors to make a profit. The choice of terms and composition of the notes was made by clients independently. All clients were offered notes with 100% capital protection; however, their returns were always lower, in line with the fundamental market rule 'the higher the risk, the higher the return, and vice versa'», the company reported.
As we have written before, by law, brokerage companies are not obliged to inform clients about market changes in real time. «Jusan Invest» emphasised that the procedure and conditions under which clients are provided with information in real time are determined by the agreement and the broker's internal rules.
These conditions are as follows:
- the broadcasting of information, prices and trading results on the international securities market for financial instruments depends on whether «Jusan Invest» has contractual relations with providers of trading information systems;
- «Jusan Invest» independently determines which financial instruments on the KASE trading list and/or the international securities market the company will broadcast prices for in near real-time.
Thus, the company believes that accusations regarding the absence of real-time quotation broadcasting are unfounded. A more detailed response from JSC «First Heartland Jusan Invest» can be found via this link.
Meanwhile, the editorial board of the FBRK reminds that the Financial Market Regulation and Development Agency has drawn up 82 protocols on administrative offences against «Jusan Invest». Among the serious violations, it was established that the company unlawfully sold financial instruments to non-qualified clients.
Undoubtedly, when investing funds in securities, depositors should be aware of the possible risks, especially when dealing with previously unfamiliar financial instruments.
However, in this situation, the broker's responsibility should not be downplayed, as evidenced by the violations identified by the regulator, as well as certain facts that are available to the editorial board of the FBRK.