Galvin begins inquiry into sales practices

State regulators today began an inquiry into the sales practices of Massachusetts broker-dealers who sell complex securities known as "structured products" to retail investors.

The inquiry was disclosed in a statement from Massachusetts Secretary of State William F. Galvin, and initial inquiries have gone to units of Bank of America Corp., Morgan Stanley, and Wachovia Corp., Galvin's office said.

A structured product is a security whose value is based on or derived from an index, a commodity, or another security, and broker-dealers are increasingly pitching such products to retirees and Main Street investors, according to Galvin's office.

"These 'structured product' instruments are highly complex and assume a level of research on the part of the investor which is higher than most securities require," Galvin said in a statement. "It is in the public interest for the Securities Division of this office to assess the compliance procedures and supervision of Massachusetts broker-dealers offering these products to retail investors in the commonwealth."
(By Chris Reidy, Globe staff)