Articles Tagged with leveraged ETF

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered as a result of financial advisors recommending high risk leveraged exchange-traded funds (ETFs).  Broker-dealer Purshe Kaplan Sterling Investments was charged by the Massachusetts Securities Division with selling “unsuitable investments to investors while operating as independent investment advisers of Harvest Group Wealth Management,” according to  “Despite warnings from FINRA that leveraged exchange-traded funds are typically unsuitable for average investors who plan to hold them for more than a day, the Harvest Group invested more than 340 client accounts in leveraged exchange-traded funds for days, weeks, months, and even a year,” the state regulator stated. FINRA is the federal regulator of the U.S. securities industry.

According to the Massachusetts complaint, “more than $2.3 million in losses were incurred as a result of unsuitable investments in leveraged ETFs. Purshe Kaplan had a duty to review the transactions as part of their supervisory responsibilities, even though they were conducted outside of the firm.”

Investments like ETFs can be highly leveraged, which means they carry high downside risk and can easily lose money under certain market conditions. Brokers are under a legal obligation to carefully vet all trades and investments with you to ensure that the investments they are selling meet your financial goals and risk tolerance. Leveraged ETFs specifically, are designed to be trading vehicles, not held long-term, because they will not achieve their stated objectives long-term. They are designed to achieve their objectives daily, and are totally unsuitable for buy-and-hold investors. Unfortunately, many financial advisors do not understand this.

If you have suffered losses with ProSHares Ultra Short 20+ please call our securities law firm in Chicago to talk about your options with an attorney for free. ProSHares Ultra Short (TBT) uses derivatives to provide twice the opposite of the daily performance of 20-year Treasury bonds with a 94% correlation to Treasury yields. When the yields go up, TBT goes up by double and there is a potential for huge returns for investors. According to a report from InvestmentNews, TBT has seen almost $10 billion worth of inflows but has only $2.8 billion to show for it. TBT is a leveraged ETF, and one of the largest in the country. It comes with significant risk in order to to meet its investment strategies such as swaps futures contracts and other derivative instruments. It therefore can be very risky to investors. A broker has a duty to recommend securities and investments to clients that are in accordance with their investment objectives, portfolio, age, net worth and risk tolerance. If they do not, their brokerage firm can be held responsible for investment losses because they have a duty to reasonably supervise them while they are employed there.

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