Investor Alert

FINRA Warns High-Yield CD Offers Can Be Bait for High-Commission Investments

Low-interest climate opens creative ‘bait & switch’ ploys targeting seniors

February 10, 2016 — WASHINGTON–(BUSINESS WIRE)–Advertisements touting higher-than-average CD yields might actually be a lure to trick investors into buying costly investments, the Financial Industry Regulatory Authority said today in a new Investor Alert.

“In light of today’s low interest rates, these ads attract attention. Some may be legitimate marketing, but calls into our Securities Helpline for Seniors indicate that many such ads are ploys in which the CD is used as bait to try to sell you a high-commission product, such as a fixed or equity-indexed annuity, a complex insurance investment that is not FDIC-insured and not subject to federal securities laws,” said Gerri Walsh, FINRA’s Senior Vice President of Investor Education. “The reality with these CD come-ons is that you may end up walking out with a costly financial product that is not a CD, and not risk-free.”

Be wary if you respond to one of these promotions for a certificate of deposit, Walsh recommended. Most require that you show up at an office and speak with a salesperson, who may try to sell you an alternative product very different from a CD. And whether you buy the CD or the alternative, you generally must commit to a sizable minimum purchase amount, such as $25,000.

Does the yield include a ‘bonus’?

In addition, the yield on the CD may include a “bonus,” which is an amount above the average percentage yield, or APY. This bonus is essentially an incentive paid by the company or salesperson to get you in the door to hear the sales pitch for another product, such as a fixed or equity-indexed annuity.

If you say “no” to the product being pitched, you can generally still buy a CD, but the salesperson may direct you to a local bank or elsewhere where you will get the going rate. The salesperson will then likely pay you the difference between the CD rate offered by the issuing bank and the promotional rate that got you in the door. From the seller’s perspective, this “bonus” is simply a marketing cost, similar to a free meal at an investment seminar.

calls into our Securities Helpline for Seniors indicate that many such ads are ploys in which the CD is used as bait

After the purchase, you’ll probably receive sales pitches for additional financial products, which may be offered at a discount, but you are likely to pay a hefty commission.

If you have questions about the legitimacy of one of these promotional offers, contact your state insurance commission.

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Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014, members of the public used this service to conduct 18.9 million reviews of broker or firm records. Investors can access BrokerCheck at or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA’s Disciplinary Actions Online database. Investors can also call FINRA’s Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.




FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit