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American Express Co.'s preferred stock was cut to junk recently and your broker may have misled you about the quality of this investment or overconcentrated your portfolio in it. If you own this security please contact us today.

April 30, 2009 -- American Express Co.’s preferred stock grade was cut to junk by Standard & Poor’s Ratings Services, which said deposits gathered to help fund the credit- card company may be vulnerable to interest-rate changes.

The preferred stock of American Express -- the biggest U.S. card company by purchases -- was cut to BB, or non-investment grade, from BBB, and the counterparty credit rating dropped to BBB+/A-2 from A/A-1, according to a statement today from S&P.

MORE ABOUT PREFERRED STOCK BELOW:

Soreide Law Group, PLLC, is filing claims on behalf of investors who have sustained economic losses as a result of overconcentration in “preferred” stocks issued by financial companies. Many financial based companies, such as banks, began issuing shares of preferred stock earlier this year in an effort to raise capital. Many brokerage firms, including UBS, Morgan Stanley, and Citigroup were either involved in the underwriting or marketing of these products. Its possible that extra “sales credits” were utilized to incentivize brokers into marketing of these products. This has resulted in many investor complaints involving Brokerage firms overconcentrating clients in securities issued by financial based companies. Examples include overconcentration in preferred issues of Fannie Mae, Freddie Mac, Barclays, Washington Mutual, Lehman Brothers, Wachovia, Bear Stearns, and Merrill Lynch. If a broker over concentrates a customer’s investments in one asset class or industry to the point that the portfolio lacks sufficient diversification and the portfolio declines significantly, the customer might be exposed to increased and unnecessary risk of loss. A broker who does not diversify his customers’ portfolio is potentially liable if that investment declines in value. In addition, the broker may be liable if his recommendations were based on self-serving motives or even simple lack of due diligence.

IF YOU OWN PREFERRED STOCK PLEASE CONTACT US TO DISCUSS YOUR CASE FREE

In times of market crisis most preferred securities act more like common stock than fixed income. As a result, preferred securities miss the upward price appreciation that common stocks enjoy but are exposed to the downward declines. These investments that are traditionally thought of as income-producing vehicles have lost significant value, performing far below their income generating alternatives.

Preferred stocks are traditionally marketed to risk averse and income seeking investors. The driving appeal of preferred stocks is the return from dividend payments. However, many preferred shares are callable, meaning that the issuing company can repurchase the shares at par value and pay no further dividends. If interest rates fall then companies have an incentive to call the security so preferred shares carry an inherent interest rate risk. Other risks are associated with the credit of the issuer, the potential for overconcentration in specific industries, and lower liquidity than common stock.

Nearly 72% of all preferred stocks come from the banking industry, insurance industry, or other financial service industry. Only a carefully constructed preferred stock portfolio can avoid the associated over concentration risk.

Preferred stocks are a hybrid of debt and equity investments. Like traditional debt, preferred stocks carry preference over common stock for dividend payments and bankruptcy proceedings. Also like debt investments, preferred shares offer a fixed dividend payment similar to bonds. However, like equity, preferred stock can fluctuate in value, especially when the value of the issuing firm is low. Preferred stocks are given ratings similar to bond ratings but preferred ratings are almost always lower than bond ratings because preferred securities do not have the same guarantees for interest payments.