Did your Credit Suisse broker recommend to you The VelocityShares Daily Inverse VIX Short-Term (XIV) exchange-traded note (ETN) to you? If so, you may be able to recover your losses with this security on a contingency fee basis in the Financial Industry Regulatory Authority (FINRA) arbitration forum. XIV supposedly gives the opposite return of the Cboe Volatility Index (VIX), which is the market’s turbulence gauge, and is supposed to bet on calm markets. It and its sister fund, ZIV, are designed to go up when the volatility of the S&P 500 goes down. XIV was issued by Credit Suisse, slumped almost 4 percent on Tuesday morning, and closed down 93 percent on the same day, losing nearly 100 percent of its value. Many exchange-traded securities that are also supposed to be bets on calm markets were halted Tuesday, after losing the majority of their value overnight.
According to the XIV fund’s prospectus: “The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks…The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be suitable for investors who plan to hold them for longer than one day.”
XIV is down more than 80 percent in extended trading as of yesterday, because of its popularity with hedge funds betting on an ever-calm market. Because of the market decline, fear has sparked among some traders that violent declines in ETNs like XIV would cause market volatility measures to spike further. It also raised fears of even bigger losses from hedge funds and other investors holding this security, as they may not be able to sell.
Brokers at firms like Credit Suisse must do their due diligence on every security they recommend or sell, by taking into account the security’s risk level and liquidity. They must also take into account their customer’s ages, net worth, investment risk tolerance and investment sophistication levels before doing so. If they do not, Credit Suisse may be liable for money losses because the firm had a duty to reasonably supervise its brokers. Please call today if you lost money in XIV because of the recommendation by your Credit Suisse broker. We only make money if you recover yours.