Has your Financial Adviser or Broker sold you Leveraged ETFs? If yes, you may have a claim for any losses incurred.
A leveraged ETF is an exchange-traded fund (ETF) that utilizes financial derivatives and debt to amplify the returns of an underlying index. The fund essentially borrows money and combines this money with investors’ money to purchase derivatives such as options, futures, or swaps. Because of the use of debt and derivatives, these ETFs carry a significant amount of risk. These funds also generally charge higher expenses to shareholders, which results in reduced returns (or increased losses if the market goes against the investment objective of the fund).
Inverse ETFs (also known as “Short” ETFs or “Bear” ETFs) are exchange-traded funds that are constructed of different derivatives that are expressly designed to profit from a decline in the value of an underlying benchmark. In other words, when the market declines, the value of inverse ETFs rise and when the market increases, the value of inverse ETFs decline. Several investment companies have also designed leveraged inverse ETFs, which seek to provide a multiple profit from a decline in the value of an underlying benchmark. These funds are designed to provide profits that are equal to double, and in some cases triple, the amount of the decline in the benchmark.
Both leveraged and inverse ETFs are issued with an investment objective. However, unlike mutual funds and traditional ETFs, these objectives are not targeted for the long-term. Rather, as stated in a recent warning by the Securities and Exchange Commission (SEC):
Most leveraged and inverse ETFs reset daily, meaning that they are designed to achieve their stated objectives on a daily basis. Their performance over longer periods of time -- over weeks or months or years -- can differ significantly from the performance (or inverse of the performance) of their underlying index or benchmark during the same period of time. This effect can be magnified in volatile markets.
The most popular of these investments are managed by Rydex, Direxion, and ProShares.
If your stockbroker or financial advisor has sold you any leveraged ETFs, or purchased any leveraged ETFs in your accounts, and you have lost money on these investments, you may be entitled to recover these losses.
The Kueser Law Firm is currenlty representing investors who were sold Leveraged ETFs and inverse ETFs. If you have been sold these overly risky investments, you should contact an attorney to discuss your rights. If you would like us to contact you, please complete the form to the left. Otherwise, feel free to contact us at:
