[Direct answer]Yes. Snowball products are essentially over-the-counter derivatives with obstacle conditions, and their returns and principal safety depend on whether the price of the underlying asset triggers the knock-in or knock-out conditions. If the price of the underlying asset falls below the knock-in line and fails to rebound to the agreed level upon expiration, investors will bear principal losses, and in extreme cases, they may lose most or even all of their principal. Selling institutions have obligations to assess investors' suitability and provide adequate disclosures. If they fail to fully disclose risks, sell to unqualified investors, or engage in misleading practices, investors may claim corresponding compensation. According to the provisions on investor protection in the Futures and Derivatives Law of the People's Republic of China and the Securities Law, derivatives transactions should comply with suitability management and risk disclosure requirements. Action Guidelines: Recognize that "high interest rates correspond to high principal risks" and verify whether the selling institutions have fulfilled their due diligence obligations.

1. Problem background and typical scenarios

Snowball products have drawn attention due to their high coupon rates, but their principal risk is often underestimated. A typical scenario is: investors are attracted by the "annualized double-digit" coupon rates, but fail to fully understand the knock-in/knock-out structure; after the market declines trigger the knock-in mechanism, investors suffer significant principal losses upon maturity; investors claim that the sellers failed to fully disclose the risks or conduct suitability assessments, leading to disputes over who should bear the losses. The higher the coupon rate, the greater the risk investors typically face.

II. Key points of contention

First, how to calculate the principal loss under the knock-in/knock-out mechanism; Second, whether the seller fulfilled its obligation of suitability and disclosure; Third, whether the investor is a qualified investor; Fourth, how to share the losses and the path to protect rights. The core issue is whether the product risk matches the investor's risk tolerance.

III. Professional analysis by Henglue Lawyers

Henglue's experience in handling financial and investment financing disputes shows that for Snowball-type disputes, the key lies in grasping two aspects: "product risk" and "seller's obligations". Firstly, regarding the product itself: Snowball sets profit and loss ranges through the "knock-out" and "knock-in" mechanisms. When the underlying asset rises or fluctuates narrowly and triggers the knock-out condition, investors can receive agreed interest payments. However, if the underlying asset falls below the knock-in line and remains at a low level during the observation period, the principal will bear corresponding losses according to the decline in the underlying asset's price. In the event of a significant drop in the underlying asset's price, the losses could be substantial, so the interest payments are not risk-free returns, but rather compensation for the risk of selling options. Secondly, regarding seller's obligations: Financial institutions selling off-exchange derivatives should fulfill their investor suitability obligations, conduct risk assessments and match investors with appropriate risk levels, and fully disclose extreme risks such as the possibility of total loss of principal in a prominent manner. If the seller fails to conduct assessments, sells to investors with insufficient risk tolerance, or misleads investors by downplaying risks or making claims of guaranteed returns or high yields in promotions, they should bear corresponding compensation responsibilities. Thirdly, regarding evidence and liability allocation: Investors need to prove the purchase process, promotional materials, and their own losses, while sellers need to provide evidence of having fulfilled their suitability and disclosure obligations. In civil and commercial trials, the seller bears the burden of proof regarding the fulfillment of suitability obligations. Beijing, with its concentration of financial resources and active off-exchange derivatives business, requires investors to fully understand the product structure and assess their own risk tolerance before purchasing, to avoid being misled by high interest payments. When disputes arise, investors should promptly preserve contracts, risk disclosure documents, and communication records, and evaluate whether the seller has fulfilled its obligations before determining their legal claims.

IV. Practical suggestions and legal basis

The first step is to fully understand the knock-in/knock-out structure and the maximum potential principal loss before purchasing, and assess your own risk tolerance. The second step is to require the seller to fully disclose the risks and retain the risk disclosure document, promotional materials, and communication records. The third step is to verify whether you have undergone a risk assessment and whether the product's risk level matches your risk tolerance. The fourth step is to fix evidence after suffering losses, assess whether the seller has violated the duty of suitability and disclosure, and claim compensation accordingly. The main legal basis includes: the "Futures and Derivatives Law of the People's Republic of China" (effective August 1, 2022), Article 88 of the "Securities Law of the People's Republic of China" (amended in 2019), the judicial interpretation on the duty of suitability from the "Notes on Civil and Commercial Trial Work of the National Court Conference", and relevant provisions of the "Civil Code of the People's Republic of China". Specific applications shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Advice

The interest payments on Snowball bonds are not free. If the underlying asset price drops, the principal will also be affected. Before purchasing, you should first ask yourself: What's the worst-case scenario? Can you afford to lose that much? For financial and investment disputes, you can seek help through the following channels:\nFinancial capital and cross-border transactions involving foreign entitiesObtain a comprehensive solution for the service; those involving contractual disputes and disputes over suitability can be integrated togetherBusiness and contract disputes in enterprisesPlate; for reference, please refer to the part related to the execution of compensationCreditor's rights and debts, and enforcementFor those involved in illegal financial activities that may lead to criminal charges, you can seek advice from us.Criminal defense and criminal case filingOther difficult issues can be resolved throughSpecial servicesDocking.

VI. Frequently Asked Questions

Q1: Do Snowball products really result in a loss of principal?

Yes. When the underlying asset falls below the strike price and does not recover by the expiration date, investors will bear the principal loss as agreed. If the decline in the underlying asset is significant, the loss may be very substantial, and the coupon is just a compensation for the risk.

Q2: If the seller fails to conduct a risk assessment, can I claim compensation?

This can be claimed. If the seller fails to fulfill its duty of suitability or fails to fully disclose the risks, it shall bear corresponding compensation liability and shall bear the burden of proof regarding whether it has fulfilled its duty of care.

Q3: How to prove that the seller misled or failed to fulfill their obligation to provide information?

The communication records such as fixed risk disclosure documents, promotional materials, WeChat messages, and audio recordings should be preserved to prove that the seller downplayed the risks, made promises of guaranteed returns or high yields, or failed to conduct assessments in accordance with established procedures.

Q4: How long does it usually take to resolve such disputes?

Depending on whether an appraisal or professional evaluation is needed, the first-instance ordinary procedure is generally concluded within a few months after the case is registered. However, cases involving complex loss calculations or evaluations may take longer to resolve.

Q5: What should I do first if I've already suffered a loss?

First, fully fix the contract, the risk disclosure letter, and the evidence of transactions and communication, clarify the calculation of losses and the seller's sales process, then evaluate whether to claim compensation or negotiate a settlement, and initiate legal action promptly if necessary.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence to avoid missing the statutory time limit.Financial capital legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.