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Structured Products Solutions

In its simplest form, structured products are securities that often take the form of certificates of deposit or corporation issued notes that have payoffs derived from the performance of underlying assets such as an equity index, commodities, or currencies. The characteristics of structured products (e.g. maturity, underlying asset, and payout formula) are fixed at issuance and are designed to remain unchanged throughout the life of the investment.

At BB&T Scott & Stringfellow, our team of structured product specialists works with a number of issuers to deliver attractive terms and upside economics to our customers. Additionally, by adding several issuers to the platform, we allow our clients to gain access to a wide range of underlying assets, market opinions, and issuer credits.

                                       Structured Products Design

Underlying Asset

Investor Goals

Market Outlook

Equity Index

Principal Protection

Bullish

Commodities

Income Stream

Bearish

Fixed Income

Enhanced Return

Sideways

Currencies

Diversification

High / Low Volatility


MARKET LINKED CERTIFICATE OF DEPOSITS (MLCDS)
MLCDS are 100 percent principal-protected if held to maturity and are FDIC insured up to applicable limits. Generally, these products are suited for conservative investors who are seeking capital preservation while potentially generating a higher rate of return versus traditional fixed income instruments.

Before purchasing a MLCD, there are a few important risk factors to consider. Each product is different and carries unique risks; it is important for our clients to consult the prospectus for each individual offering and speak to their financial advisor prior to participating in any new issue. Some risk factors include, but are not limited to, credit risk (if FDIC insurance limits have been maxed out), liquidity risk, and market risk.

STRUCTURED NOTES
For sophisticated investors who are willing to assume more risk (i.e. credit risk and some/all principal risk) in order to achieve their investment objectives, BB&T Scott & Stringfellow offers a full range of structured notes. Structured notes are designed to help investors capitalize on a particular market view and can help achieve a wide range of investor objectives and risk tolerances, including some or full principal protection, income generation and participating in equity returns.

Similar to MLCDs, structured notes carry certain risks that investors should be aware of before investing. These risks include, but are not limited to:

Credit Risk: Structured products are unsecured debt obligations of the issuer. As a result, they are subject to the risk of default by the issuer. The creditworthiness of the issuer will affect its ability to pay interest and repay principal. The financial condition and credit rating of the issuer are, therefore, important considerations. The credit rating, if any, pertains to the issuer and is not indicative of the market risk of the structured product or underlying asset. If a structured issue provides principal protection or a minimum return, any such guarantee rests on the credit quality of the issuer. Those issued by banks in the forms of CDs may also provide FDIC insurance with standard coverage limitations.

Liquidity risk: Structured products are generally not listed on an exchange or may be thinly traded. As a result, there may be a limited secondary market for these products, making it difficult for investors to sell them prior to maturity. Investors who need to sell structured products prior to maturity are likely to receive less than the amount they invested. Therefore, structured products with longer maturities are subject to greater liquidity risk. The price that someone is willing to pay for structured products in a secondary sale will be influenced by market forces and other factors that are hard to predict. Sometimes, a broker-dealer affiliate of the issuer may make a market for the resale of structured products prior to maturity but the price it is willing to pay will be adversely affected by the commissions paid by the issuer on the initial sale of the structured products and the issuer’s hedging costs. Some structured products have lock-up periods prohibiting their sale during such periods. Persons who invest in structured products should have the financial means to hold them until maturity.

Income risk: Structured products may not pay interest (or may not pay interest in regular amounts or at regular intervals), so they are not appropriate for investors looking for current income. Because the return paid on structured products at maturity is tied to the performance of a basket of assets and will be variable, it is possible that the return may be zero or significantly less than what investors could have earned on an ordinary, interest-bearing debt security. The return on structured products, if any, is subject to market and other risks related to the underlying assets.

Pricing Risk: Structured products are difficult to price since their value is tied to an underlying asset or basket of assets and there typically is no established trading market for structured products from which to determine a price. Additionally, along with the stated risks above, there is the potential for underperforming traditional fixed income instruments or equities. We ask that our clients please consult the prospectus of each individual offering as well as their financial advisor for a full understanding of these risk characteristics.