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.