by Brian Mahany
In recent years many investors have flocked to Exchange Traded Funds’ or ETF’s. They are easily traded and generally have lower costs. Most ETF’s track an index such as the price of gold or the S&P 500. Depending on the exchange tracked, some are more risky than others but most are generally easy to understand.
Along came Leveraged ETF’s and dramatically increased the risks for investors.Leveraged ET’s are bundles of derivatives. These derivatives are not stand-alone assets such as an ounce of gold. Derivatives includes options, swaps, foreign exchange instruments, and some really exotic instruments. The more leveraged, the more exotic.
Therein lies the problem. Derivatives and leveraged exchange traded funds are so complex that few people understand them. That includes the brokers who often sell them based on promises of quick and dramatic profits.
As these leveraged ETF’s became more popular, so did warnings from regulators. In June of 2009, the Financial Industry Regulatory Authority (FINRA) warned brokers that they must provide special training to brokers selling these instruments and must insure that customers fully understand what they are buying and the risks involved.
The SEC chimed in two months later and warned customers that buy these products to have a broker willing to constantly monitor these funds.
Unfortunately, many brokers continue to sell these products to unsuspecting investors. While institutional investors and professional traders may understand the risks, most regular investors do not.
If you purchased Leveraged ETF’s and lost money, consult a lawyer concentrating in securities fraud or FINRA arbitrations.
Mahany & Ertl is a full service boutique law firm that assists victims of fraud recover their money. Securities fraud, investment fraud, stockbroker claims, bank fraud and even attorney malpractice – call us, we can help.
Services provided throughout the United States. Offices in Milwaukee, Wisconsin; Detroit, Michigan and Portland, Maine. Contact Brian Mahany for more details at (414) 704-6731 (direct dial)