Articles Tagged with Leveraged ETFs

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 thediwire.com.  “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.

Stoltmann Law Offices is investigating allegations made against Summit Brokerage Services, a Boca Raton, Florida based securities brokerage firm. Recently, the Financial Industry Regulatory Authority (FINRA) brought a regulatory action against Summit, with numerous allegations that the firm failed to supervise the sale of non-traditional exchange-traded funds (ETFs) from June 2009 until December 2010. The ETFs included inverse and leveraged ETFs. The firm agreed to pay a fine of $250,000 and restitution of $9,556. ETFs are used to track and replicate the performance of an index. Leveraged ETFs try to replicate the performance of a particular index, but attempt to do so by doubling or even tripling the index. Inverse ETFs try to replicate the opposite of a particular index and can be popular tools for intra-day trading for investors. The ETFs are designed for day-trading, but often financial advisors recommend holding them for weeks or months. They are often misused in the industry. They can be very risky investments because of it. A broker’s duty is to research the investment before recommending it to a client. He also has a duty to take into account a client’s age, net worth, investment portfolio, and risk tolerance before recommending a security. If he does not, his brokerage firm may be liable for investment losses. Please call us if you experienced a similar situation with your broker or with Summit Brokerage Services. We may be able to help you bring a claim against them to recover your investment losses.

The Financial Industry Regulatory Authority (FINRA) gave Richard Martin a Wells Notice on March 25, 2015, indicating that he will be subject to a FINRA investigation regarding the sale of leveraged Exchange Traded Funds (ETFs). Martin resigned from GF Investment Services on July 7, 2015. Mr. Martin allegedly made unsuitable trades in exchange traded funds in 2015, sold unsuitable investments in ETFs in 2014, and made unsuitable short sales that were unsuitable for the customer’s risk tolerance in 2012.

Richard Martin was registered with Smith, Barney, Harris Upham & Co, Refco Securities, Morgan Stanley, Global Strategic Investments, Latam Investments, and G.F. Investment Services in Penang, Malaysia. He is not currently registered with any member firm. He has 11 customer disputes against him, two of which are currently pending. If you lost money with Richard Martin of GF Investment Services, GF can be sued in the FINRA arbitration forum to recover your financial losses. Please call us at 312-332-4200 for a free consultation with an attorney.

Stoltmann Law Offices is investigating BestVest Investments, a securities brokerage firm based out of Media, Pennsylvania. The Financial Industry Regulatory Authority (FINRA) brought a regulatory action against BestVest Investments, claiming that they failed to establish an adequate supervisory system to supervise the sales of leveraged and inverse exchange-traded funds (ETFs). These are also sometimes called non-traditional ETFs. These funds are designed to be held for less than a day, but BestVest allegedly failed to monitor how long their customers held these ETFs. BestVest agreed to a censure and a fine of $15,000.

ETFs are used to track and replicate the performance of an index, such as the S&P 500, the Russell 2000 or the Dow Jones. They oftentimes attempt to double or triple the index. They are popular because investors can invest in a basket of securities that provides diversification but with the simplicity of being a single stock. Leveraged ETFs are often risky and are not suitable for all investors. A registered representative has a duty to take into account his client’s portfolio, age, net worth and investment sophistication before recommending and executing trades on behalf of that client. Also, brokerage firms don’t always do their due diligence when researching funds such as ETFs. Many times, the registered representatives are not knowledgeable of the product and recommend holding them in an investor’s account for weeks or even months. According to a FINRA regulatory notice: “inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.”

If you invested money in ETFs with BestVest Investments, please call our Chicago-based securities law firm to speak to an attorney. We sue firms such as BestVest for not doing their due diligence on investment products. We may be able to help you sue BestVest for financial losses in the FINRA arbitration forum. The call is free with no obligation. We take cases on a contingency fee basis only.

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