FORT LAUDERDALE, FL — Did your broker recommend inverse leveraged Exchange Traded Funds (ETFs) that bet against the market? These ETFs, often prefixed by “2x” or “3x,” promise amplified returns when the market declines. But here’s the catch: they’re designed for ultra short term holds – usually just one day – and reset daily. It is significant to note that they are unsuitable for most investors.
The Risky Bet is Unsuitable for Recommendation
Direxion and ProShares are among the key players marketing these non-traditional ETFs. While they may seem tempting, they come with a black-box warning: “Investing in leveraged and inverse ETFs involves heightened risks and is not appropriate for most investors.” Moreover, the ETFs are designed for short term (one day) holding periods as they reset daily. FINRA, the broker regulatory authority, also warns brokers not to recommend these ETFs to most customers.
The Stifel Case
Recently, Stifel, Nicolaus & Company, Incorporated (Stifel) faced scrutiny over its recommendation of and its brokers recommending long-term holding of non-traditional ETFs. The consequences? Stifel was censured and fined $920,000. The brokerage firm was also ordered to pay customers more than $1 million to compensate for their losses.
The Red Flags
Stifel had systems in place to spot problematic transactions, but they either disregarded or disabled those systems. Non-traditional ETFs, like inverse and leveraged funds, despite being pitched to ordinary investors, don’t align with industry and FINRA standards for suitability.
Your Recovery Path
If your broker recommended these risky ETFs, you might have suffered losses. But you don’t have to feel responsible for those losses! The Mark Tepper law firm has a successful track record in recovering losses for investors, including cases involving brokerage firms that failed to supervise their brokers and those related to the pitfalls of inverse and leveraged ETFs.
Get Answers
Do you have questions about unsuitable trading or losses in your account(s)? Reach out directly to attorney Mark A. Tepper at 954-704-2310 or askmark@marktepper.com for a FREE case evaluation. Your retirement and investments deserve protection!