January 29, 2016 Comments (0) Blog

UBS ETRACS 2xMonthly Leveraged Long Alerian MLP ETN Risk Factors

(Last Updated On: March 31, 2017)

Investors in the UBS ETRACS 2xMonthly Leveraged Long Alerian MLP ETN received surprising news last week when UBS announced that the acceleration provision of the fund had been triggered and that due to the decline in the index, UBS was closing the fund (locking in enormous losses for investors).

The White Law Group continues to investigate the liability that brokerage firms may have for recommending the UBS ETRACS 2xMonthly Leveraged Long Alerian MLP ETN.

Brokerage firms are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor in light of that particular investor’s age, investment experience, net worth, risk tolerance, investment objectives, and income.  Firms that fail to perform adequate due diligence or that make unsuitable recommendations can be held responsible for investment losses in a FINRA arbitration claim.

For more information on the firm’s investigation, visit here.  For a free consultation, call 888-637-5510.

Additionally, brokerage firms can be held liable for losses if they fail to fully disclose the risks of an investment.  Given the enormous risks of this investment, it appears likely that some financial advisor would have failed to disclose ALL of the risks.

Here is a rundown of many (but not all) of the risks disclosed in the Prospectus for the UBS ETRACS 2xMonthly Leveraged Long Alerian MLP ETN:

Even if the Final VWAP Level of the Index at maturity or call, or upon early redemption or acceleration, has moved beneficially relative to the VWAP Level at the time you purchased the Securities, or the applicable Monthly Initial Closing Level is greater than the Index Closing Level on the Initial Trade Date, you may receive less than your initial investment in the Securities.

The payment on the Securities is linked to the VWAP Level, not to the closing level of the Index and not to the published intraday indicative value of the Securities.

The Securities are not suitable for all investors.  In particular, the Securities should be purchased only by investors who understand leverage risk and the consequences of seeking monthly leveraged investment results, and who intend to actively monitor and manage their investments.

Due to the effect of compounding, if the Current Principal Amount increases, any subsequent adverse monthly performance will result in a larger dollar reduction from the Current Principal Amount than if the Current Principal Amount remained constant.

Due to the effect of compounding, if the Current Principal Amount decreases, any subsequent beneficial monthly performance will result in a smaller dollar increase on the Current Principal Amount than if the Current Principal Amount remained constant.

The Accrued Financing Charges may be greater than financing costs that you would incur if you borrowed funds from a third party.

Changes in the LIBOR rate may affect the value of your Securities.

You are not guaranteed a coupon payment.

The Final VWAP Level may be less than the VWAP Level on the Maturity Date, Acceleration Date or Call Settlement Date, or at other times during the term of the Securities.

The Securities may be automatically accelerated and mandatorily redeemed, resulting in a loss of some or all of your investment.

There are restrictions on the minimum number of Securities you may redeem and on the procedures and timing for early redemption.

You will not know the Redemption Amount at the time you elect to request that we redeem your Securities.

Owning the Securities is not the same as owning interests in the Index constituents or a security directly linked to the performance of the index.

You have no partnership interests in any of the MLPs underlying the Index or rights to receive any equity securities.

The market value of the Securities may be influenced by many unpredictable factors.

The Securities may trade at a substantial premium to or discount from the intraday indicative value.

Standard & Poor’s may, in its sole discretion, discontinue the public disclosure of the intraday indicative value of the Index and the end-of-day closing value of the Index.

Changes in our credit ratings may affect the market value of the Securities.

Actual and perceived creditworthiness of UBS may affect the market value of the Securities.

The liquidity of the market for the Securities may vary materially over time, and may be limited if you do not hold at least 50,000 Securities.

Changes that affect the composition and calculation of the Index will affect the market value of the Securities and the Cash Settlement Amount, Call Settlement Amount, Acceleration Amount or Redemption Amount.

There are uncertainties regarding the Index because of its limited performance history.

Estimated historical, and historical, levels of the Index should not be taken as an indication of future performance during the term of the Securities.

There may not be an active trading market in the Securities; sale in the secondary market may result in significant losses.

Trading and other transactions by UBS or its affiliates in the Index constituents, futures, options, exchange-traded funds or other derivative products on such Index constituents or the Index may impair the market value of the Securities.

We and our affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding the Securities.  Any such research, opinions or recommendations could affect the level of the Index constituents, the Index or the market value of the Securities.

UBS and its affiliates have no affiliation with the Index Sponsor and are not responsible for their public disclosure of information.

The business activities of UBS or its affiliates may create conflicts of interest.

An Index constituent may be replaced upon the occurrence of certain adverse events.

There are potential conflicts of interest between you and the Security Calculation Agent.

The Security Calculation Agent can postpone the determination of the Final VWAP Level and thus the applicable Redemption Date, the Call Settlement Date, the Acceleration Settlement Date or the Maturity Date if a market disruption event occurs during the applicable measurement period.

The Security Calculation Agent can postpone the determination of the Index Closing Level and thus the applicable Monthly Valuation Date if a market disruption event occurs on the Monthly Valuation Date.

The Index constituents are concentrated in the energy industry.

Energy MLP market risks may affect the trading value of the Securities and the amount you will receive at maturity.

Index calculation disruption events may require an adjustment to the calculation of the Index.

UBS may redeem the Securities prior to the Maturity Date.

If UBS were to be subject to restructuring proceedings, the market value of the Securities may be adversely affected.

Significant aspects of the tax treatment of the Securities are uncertain.