According to a report in Reuters, an investment adviser must pay a total of $1.8 million to a group of investors in a securities arbitration ruling involving losses tied to leveraged and inverse exchange-traded funds. This is significant win for investors who suffered losses in these types of investments.
The investment advisor, Nicholas Rowe (and his firm, Focus Capital Wealth Management Inc of Bedford, New Hampshire), was apparently found liable in a case that had alleged negligence, civil fraud, and other misdeeds.
Leveraged and inverse ETFs are designed to amplify short-term returns by using debt and derivatives and are considered more suitable for professional traders than for long-term retail investors or anyone who cannot tolerate a high-risk portfolio. Many investors do not understand the magnitude of the risks of leveraged and inverse ETFs and believe that they are more akin to a normal ETF (which is designed to simply mirror the performance of an underlying index, like the S&P).
In 2009, FINRA and other regulators began issuing warnings about the sale of leveraged and inverse ETFs because they worried that securities brokers were selling them to buy-and-hold investors – a strategy likely to cause heavy losses (due to the enormous fluctuations that are experienced by these extremely short term investments).
The White Law Group continues to investigate FINRA arbitration claims involving leveraged and inverse ETFs. The brokerage firms and financial professionals that sold these products may have liability for failure to adequately disclose the risks of these products.
If you suffered losses in a leveraged or inverse exchange-traded fund and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.