The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo and Bank of America $2.15 million and ordered the firms to pay more than $3 million in restitution to customers for losses incurred from unsuitable sales of floating-rate bank loan funds. FINRA ordered Wells Fargo Advisors, LLC, as successor for Wells Fargo Investments, LLC, to pay $1.25 million and reimburse approximately $2 million in losses to 239 customers. FINRA ordered Merrill Lynch, as successor for Bank of America Investment Services, Inc., to pay $900,000 and reimburse approximately $1.1 million in losses to 214 customers. Wells Fargo and Bank of America neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Floating-rate bank loan funds are mutual funds that invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment-grade, which subjects the funds to significant default risks and illiquidity.
FINRA found that Wells Fargo and Bank of America brokers recommended floating-rate bank loan funds to customers whose risk tolerance, investment objectives, and financial conditions were inconsistent with the risks and features associated with floating-rate loan funds. The subject customers were seeking to preserve their principal or had conservative risk tolerances, but the brokers made recommendations to purchase floating-rate loan funds without having reasonable grounds to believe that the purchases were suitable for the customers. FINRA also found that the firms failed to train their sales forces regarding the unique risks and characteristics of the funds. The firms also failed to reasonably supervise the sales of floating-rate bank loan funds.
Have you suffered losses in floating-rate bank loan funds sold by Wells Fargo Advisors, Merrill Lynch, or any other broker-dealer? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers who recommended unsuitable investments and unsuitable investment strategies that caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Showing posts with label Wells Fargo. Show all posts
Showing posts with label Wells Fargo. Show all posts
Saturday, October 19, 2013
Tuesday, January 1, 2013
DON'T TRADE IN YOUR VARIABLE ANNUITY WITHOUT GETTING BACK ALL OF THE EXCESSIVE FEES!
More and more insurers are offering annuity contract buyouts to owners of Variable Annuity ("VA") contracts with a guaranteed-minimum-withdrawal benefit ("GMWB"). It seems that some insurers recognize an opportunity to retain all of the excessive fees they received from legacy VA clients and coax them out of VA contracts with GMWB features and death benefits within offer of a slightly higher account value. You remember the broker's pitch for the purchase of these VA contracts: "if the value goes down, you are guaranteed income for life"; and "every year the amount of the death benefit increases for your beneficiaries."
Why the change of heart? Well it's because many of the insurers recognize: we're in an extended period of low interest rates, and it's difficult for them to invest and make money; their VA contracts are underwater because the mutual fund sub-accounts performed poorly; and many VA contract owners can't or won't do the math! The insurers at Hartford Financial Services Group, Inc., AXA Equitable Life Ins. Co., Transamerica Life Insurance Co. and Wells Fargo want you to give up your GMWB benefit in exchange for a slightly higher account value with no more guarantees. The only beneficiaries of this exchange will be the brokers who retained all of the excessive upfront commissions and generous trailing commissions and the insurers who will duck out of VA contracts with product features that have now become unprofitable for them.
An annuity is a form of insurance that offers a series of payments for a period of time. VAs are typically higher in risk when compared to other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Most VAs do not have principal protection, so investors can lose money if markets deteriorate. GMWB gives the VA policy owner the ability to protect their retirement investments against downside market risk by allowing the owner to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.
Neither the broker nor the insurer looked out for your interest when they sold you this overpriced and unsuitable VA product and they certainly are not looking out for your interest today with the exchange offer. Make sure you consider the excessive fees you paid for the benefits they want to take back as well as the likelihood of future account losses that will no longer be protected in making your decision.
Have you suffered losses resulting from trading in your guaranteed-minimum-withdrawal benefit variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Why the change of heart? Well it's because many of the insurers recognize: we're in an extended period of low interest rates, and it's difficult for them to invest and make money; their VA contracts are underwater because the mutual fund sub-accounts performed poorly; and many VA contract owners can't or won't do the math! The insurers at Hartford Financial Services Group, Inc., AXA Equitable Life Ins. Co., Transamerica Life Insurance Co. and Wells Fargo want you to give up your GMWB benefit in exchange for a slightly higher account value with no more guarantees. The only beneficiaries of this exchange will be the brokers who retained all of the excessive upfront commissions and generous trailing commissions and the insurers who will duck out of VA contracts with product features that have now become unprofitable for them.
An annuity is a form of insurance that offers a series of payments for a period of time. VAs are typically higher in risk when compared to other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Most VAs do not have principal protection, so investors can lose money if markets deteriorate. GMWB gives the VA policy owner the ability to protect their retirement investments against downside market risk by allowing the owner to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.
Neither the broker nor the insurer looked out for your interest when they sold you this overpriced and unsuitable VA product and they certainly are not looking out for your interest today with the exchange offer. Make sure you consider the excessive fees you paid for the benefits they want to take back as well as the likelihood of future account losses that will no longer be protected in making your decision.
Have you suffered losses resulting from trading in your guaranteed-minimum-withdrawal benefit variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Sunday, December 9, 2012
BROKERS NATIONWIDE RESTART PUSH FOR INVESTORS TO BUY REVERSE CONVERTIBLES
Investors are once again being pushed into structured products such as reverse convertibles by brokers who tout sturdy profits and very little downside risk. However, representatives are unable to account for why products like reverse convertibles have been unable to deliver stellar returns without posing a significant risk to investors' capital. Reason being is that more than most brokers do not understand how reverse convertibles work and are only selling them because of the hefty commission.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.
Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.
Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Sunday, November 25, 2012
FINRA FINES WELLS FARGO $2 MILLION FOR REVERSE CONVERTIBLE SALES TO SENIORS
The Financial Regulatory Industry Authority (FINRA) has charge former Wells Fargo registered representative Alfred Chi Chen for recommending and selling reverse convertibles and making unauthorized trades in deceased customer accounts. The reverse convertible sales involved 21 customers and 172 accounts. 71% account holders were over 80 years old, and more than half of the accounts had between 50 and 90% of capital in reverse convertibles. Mr. Chen generated $1 million in commission from the sales, which contributed to investors' losses. As a result, FINRA fined Wells Fargo $2 million and ordered that customers receive restitution for unsuitable sales of reverse convertibles and other misconduct, which Wells Fargo ultimately consented to.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
Most investor are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have average 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce atpearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
Most investor are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have average 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce atpearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Friday, October 26, 2012
FINRA FINES MORGAN STANLEY, CITIGROUP, WELLS FARGO, AND UBS $9.1M OVER LEVERAGED AND INVERSE ETFS
Wells Fargo & Co. (WFC), UBS AG (UBSN), Morgan Stanley (MS), and Citigroup Inc. (C) have consented to pay a combined $9.1 million to settle Financial Industry Regulatory Authority claims that they did not adequately supervise the sale of leveraged and inverse exchange-traded funds in 2008 and 2009. $7.3 million of this is fines. The remaining $1.8 million will go to affected customers. The SRO says that the four financial firms had no reasonable grounds for recommending these securities to the investors, yet they each sold billions of dollars of ETFs to clients. Some of these investors ended up holding them for extended periods while the markets were exhibiting volatility.
It was in June 2009 that FINRA cautioned brokers that long-term investors and leveraged and inverse ETFs were not a good match. While UBS suspended its sale of these ETFs after the SRO issued its warning, it eventually resumed selling them but doesn't recommend them to clients anymore. Morgan Stanley also had announced that it would place restrictions on ETF sales. Meantime, Wells Fargo continues to sell leveraged and inverse ETFs. However, a spokesperson for the financial firm says that it has implemented enhanced procedures and policies to ensure that it meets its regulatory responsibilities. Citigroup also has enhanced its policies, procedures, and training related to the sale of these ETFs. (FINRA began looking into how leveraged and inverse ETFs are being marketed to clients in March after one ETN, VelocityShares Daily 2x VIX Short-Term (TVIX), which is managed by Credit Suisse (CS), lost half its worth in two days.)
The Securities and Exchange Commission describes ETFs as (usually) registered investment companies with shares that represent an interest in a portfolio with securities that track an underlying index or benchmark. While leveraged ETFs look to deliver multiples of the performance of the benchmark or index they are tracking, inverse ETFs seek to do the opposite. Both types of ETFs seek to do this with the help of different investment strategies involving future contracts, swaps, and other derivative instruments. The majority of leveraged and inverse ETFs "reset" daily. How they perform over extend time periods can differ from how well their benchmark or underlying index does during the same duration. Per Bloomberg, leveraged and inverse ETFs hold $29.3 billion in the US.
For investors, it is important that they understand the risks involved in leveraged and inverse ETFs. Depending on what investment strategies the ETF employs, the risks may vary. Long-term investors should be especially careful about their decision to invest in leveraged and inverse ETFs.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
It was in June 2009 that FINRA cautioned brokers that long-term investors and leveraged and inverse ETFs were not a good match. While UBS suspended its sale of these ETFs after the SRO issued its warning, it eventually resumed selling them but doesn't recommend them to clients anymore. Morgan Stanley also had announced that it would place restrictions on ETF sales. Meantime, Wells Fargo continues to sell leveraged and inverse ETFs. However, a spokesperson for the financial firm says that it has implemented enhanced procedures and policies to ensure that it meets its regulatory responsibilities. Citigroup also has enhanced its policies, procedures, and training related to the sale of these ETFs. (FINRA began looking into how leveraged and inverse ETFs are being marketed to clients in March after one ETN, VelocityShares Daily 2x VIX Short-Term (TVIX), which is managed by Credit Suisse (CS), lost half its worth in two days.)
The Securities and Exchange Commission describes ETFs as (usually) registered investment companies with shares that represent an interest in a portfolio with securities that track an underlying index or benchmark. While leveraged ETFs look to deliver multiples of the performance of the benchmark or index they are tracking, inverse ETFs seek to do the opposite. Both types of ETFs seek to do this with the help of different investment strategies involving future contracts, swaps, and other derivative instruments. The majority of leveraged and inverse ETFs "reset" daily. How they perform over extend time periods can differ from how well their benchmark or underlying index does during the same duration. Per Bloomberg, leveraged and inverse ETFs hold $29.3 billion in the US.
For investors, it is important that they understand the risks involved in leveraged and inverse ETFs. Depending on what investment strategies the ETF employs, the risks may vary. Long-term investors should be especially careful about their decision to invest in leveraged and inverse ETFs.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Friday, October 19, 2012
WELLS FARGO, CITIGROUP, MORGAN STANLEY, UBS FINED FOR IMPROPER SALES OF HIGH-RISK ETFS NATIONWIDE
The Financial Industry Regulatory Authority (FINRA) announced that it ordered Wells Fargo Advisors, Citigroup Global Markets, Morgan Stanley, and UBS Financial Services to pay more than $9.1 million for failure to supervise and failure to have a reasonable basis for recommending selling leveraged and inverse exchange traded funds. Each of the four firms sold billions of dollars of these leveraged and inverse exchange traded funds.
The payments consist of more than $7.3 million in fines and $1.8 million in restitution to customers who purchased the leveraged and inverse exchange traded funds. The breakdown is as follows:
In addition, FINRA found that the firms' registered representatives made unsuitable recommendations of leveraged and inverse exchange-traded funds to some customers with conservative investment objectives and/or risk profiles, some of whom held them for extended periods during January 2008 through June 2009 when the markets were volatile.
Leveraged and inverse exchange-traded funds have risks not found in traditional exchange traded funds. Those risks flow from the daily reset, leverage and compounding of leveraged and inverse exchange traded funds, which caused them to differ significantly from the performance of the underlying index or benchmark when held for longer periods of time. That was particularly true in the volatile markets that existed during January 2008 through June 2009.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
The payments consist of more than $7.3 million in fines and $1.8 million in restitution to customers who purchased the leveraged and inverse exchange traded funds. The breakdown is as follows:
- Wells Fargo - $2.1 million fine and $641,489 in restitution
- Citigroup - $2 million fine and $146,431 in restitution
- Morgan Stanley - $1.75 million fine and $604,584 in restitution
- UBS - $1.5 million fine and $431,488 in restitution
In addition, FINRA found that the firms' registered representatives made unsuitable recommendations of leveraged and inverse exchange-traded funds to some customers with conservative investment objectives and/or risk profiles, some of whom held them for extended periods during January 2008 through June 2009 when the markets were volatile.
Leveraged and inverse exchange-traded funds have risks not found in traditional exchange traded funds. Those risks flow from the daily reset, leverage and compounding of leveraged and inverse exchange traded funds, which caused them to differ significantly from the performance of the underlying index or benchmark when held for longer periods of time. That was particularly true in the volatile markets that existed during January 2008 through June 2009.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Thursday, October 18, 2012
WATCH OUT - UNITED STATES AND INTERNATIONAL ETF AND ETN INVESTORS!
The SEC and FINRA are finally stepping up to regulate nontraditional ETFs and ETNs and to ensure that these complicated products are not sold to unsophisticated investors.
Citigroup Global Markets Inc., Morgan Stanley, UBS Financial Services Inc. and Wells Fargo recently agreed to pay $9.1 million to settle allegations that they sold leveraged and inverse exchange-traded funds to clients who had no business investing in the complex instruments.
In its first actions against firms that put clients in these products, FINRA said the four wirehouses experienced supervisory failures and lacked a "reasonable basis" for recommending the securities to certain clients. Together, the firms bought and sold $27 billion of the nontraditional ETFs from January 2008 through June 2009, FINRA said.
The firms agreed to pay the fines of $7.3 million and restitution of $1.8 million without admitting or denying the allegations.
These sanctions are likely only the beginning as it is now clear that ETFs and ETNs are a significant problem for the brokerage industry.
In March 2010, the SEC stopped approving applications for ETFs that use derivatives and indicated that it wants to review whether additional investor protections are warranted, particularly for leveraged and inverse ETFs.
FINRA and the SEC's involvement in these products is a result of the leverage and risks associated with these investments and the concern that such investments can be confused with less risky and more traditional ETFs.
The more exotic ETFs are riskier because they reset daily and use leverage and compounding. Results of leveraged and inverse ETFs can differ significantly from the performance of the underlying index, especially when held for long periods of time and during volatile markets.
FINRA and the SEC published a joint investor alert in 2009 warning that leveraged and inverse ETFs are complicated investments that focus on meeting daily performance goals. The agencies said long-term performance is likely to be very different than the investment's stated daily objectives, and recommended that investors discuss the products with an investment professional.
The following is a list of some of the ETFs and ETNs currently available:
BGZ - Direxion Daily Large Cap Bear 3X Shares ETF
BIS - UltraShort NASDAQ Biotechnology ETF
BRIS - Direxion Daily BRIC Bear 3x Shares ETF
BXDB - Barclays Short B Leveraged Inverse S&P 500 Total Return ETN
COWS - Direxion Daily Agribusiness Bear 3x Shares ETF
DDG - Short Oil & Gas ProShares ETF
DGLD - 3x Inverse Gold ETN
DLBS - iPath US Treasury Long Bond Bear ETN
DMM - MacroShares Housing Down ETF
DNO - United States Short Oil ETF
DOG - Short Dow30 ProShares ETF
DOY - MacroShares $100 Oil Down ETF
DPK - Direxion Daily Devloped Markets Bear 3X Shares ETF
DSLV - 3x Inverse Silver ETN
DSTJ - JP Morgan 2X Short US Long Treasury Futures ETN
DSXJ - JP Morgan 2X Short US 10 Year Treasury Futures ETN
DUG - UltraShort Oil & Gas ProShares ETF
DUST - Direxion Daily Gold Miners Bear 3x Shares ETF
DXD - UltraShort Dow 30 ProShares ETF
EDZ - Direxion Daily Emerging Markets Bear 3X Shares ETF
EEV - UltraShort MSCI Emerging Markets ProShares ETF
EFU - UltraShort MSCI EAFE ProShares ETF
EFZ - Short MSCI EAFE ProShares ETF
ERY - Direxion Daily Energy Bear 3X Shares ETF
EUM - Short MSCI Emerging Markets ProShares ETF
EUO - ProShares UltraShort Euro ETF
EWV - UltraShort MSCI Japan ProShares ETF
FAZ - Direxion Daily Financial Bear 3X Shares ETF
FXP - UltraShort FTSE/Xinhua China25 Proshares ETF
GASX - Direxion Daily Natural Gas Related Bear 3X Shares ETF
GLL - UltraShort Gold ProShares ETF
INDZ - Direxion Daily India Bear 3x Shares ETF
IPAL - 2x Inverse Palladium ETN
IPLT - 2x Inverse Platinum ETN
KRS - Short KBW Regional Banking ETF
KOLD - UltraShort DJ-UBS Natural Gas ETF
LHB - Direxion Daily Latin America 3x Bear Shares ETF
MATS - Direxion Daily Basic Materials Bear 3X Shares ETF
MWN - Direxion Daily Mid Cap Bear 3X Shares ETF
MYY - Short MidCap400 ProShares ETF
MZZ - UltraShort MidCap400 ProShares ETF
PSQ - Short QQQ ProShares ETF
PST - ProShares UltraShort 7-10 Year Treasury ETF
QID - UltraShort QQQ ProShares ETF
QLD - Ultra QQQ ProShares ETF
REK - ProShares Short Real Estate ETF
RETS - Direxion Daily Retail Bear 3X Shares ETF
REW - UltraShort Technology ProShares ETF
RINF - ProShares 30 Year TIPS/TSY Spread ETF
RSW - Rydex Inverse 2x S&P 500 ETF
RUSS - Direxion Daily Russia Bear 3x Shares ETF
RWM - Short Russell2000 ProShares ETF
RXD - UltraShort Health Care ProShares ETF
SAGG - Daily Total Bond Market Bear 1x Shares ETF
SBB - ProShares Short S&P SmallCap600 ETF
SBM - ProShares Short Basic Materials ETF
SCC - ProShares UltraShort Consumer Services ETF
SCO - ProShares UltraShort DJ-AIG Crude Oil ETF
SDD - ProShares UltraShort SmallCap600 ETF
SDK - ProShares UltraShort MidCap Growth ETF
SDOW - UltraPro Short Dow 30 ETF
SDP - ProShares UltraShort Utilities ETF
SDS - ProShares UltraShort S&P500 ETF
SEF - Short Financials ProShares ETF
SFK - ProShares UltraShort Russell1000 Growth ETF
SH - ProShares Short S&P500 ETF
SICK - Direxion Daily Healthcare Bear 3X Shares ETF
SIJ - ProShares UltraShort Industrials ETF
SJB - ProShares Short High Yield ETF
SJH - UltraShort Russell2000 Value ProShares ETF
SJL - ProShares UltraShort MidCap Value ETF
SFK - UltraShort Russell1000 Growth ProShares ETF
SKK - UltraShort Russell 2000 Growth ProShares ETF
SMDD - UltraPro Short Mid-Cap 400 ETF
SMN - ProShares UltraShort Basic Materials ETF
SOXS - Direxion Daily Semiconductor Bear 3x Shares ETF
SPXU - ProShares Ultra Pro Short S&P 500 ETF
SQQQ - UltraPro Short QQQ ETF
SRS - ProShares UltraShort Real Estate ETF
SRTY - UltraPro Short Russell 2000 ETF
SSG - ProShares UltraShort SemiConductor ETF
SVXY - ProShares Short VIX Short-Term Futures ETF
SZK - ProShares UltraShort Consumer Goods ETF
TBF - ProShares Short 20+ Year Treasury ETF
TBT - ProShares UltraShort 20+ Year Treasury ETF
TBX - Short 7-10 Year Treasury ETF
TBZ - UltraShort 3-7 Year Treasury ETF
TLL - ProShares UltraShort Telecommunications ETF
TMV - Direxion Daily 30-year Treasury Bear 3x Shares ETF
TOTS - Direxion Daily Total Market Bear 1X Shares ETF
TPS - ProShares UltraShort TIPS ETF
TTT - UltraPro Short 20+ Year Treasury ETF
TWM - UltraShort Russell 2000 ProShares ETF
TYBS - Daily 20 Year Plus Treasury Bear 1x Shares ETF
TYNS - Daily 7-10 Year Treasury Bear 1x Shares ETF
TYO - Direxion Daily 10-year Treasury Bear 3x Shares ETF
TYP - Direxion Daily Technology Bear 3x Shares ETF
TZA - Direxion Daily SmallCap Bear 3x Shares ETF
TWQ - ProShares UltraShort Russell 3000 Index ETF
UDN - PowerShares US Dollar Bearish ETF
YCS - ProShares UltraShort Yen ETF
YXI - Proshares Short FTSE / Xinhua China 25 ETF
ZSL - ProShares UltraShort Silver ETF
AGA - PowerShares DB Agriculture Double Short ETN
BOM - PowerShares DB Base Metals Double Short ETN
DDP - PowerShares DB Commodity Short ETN
DEE - PowerShares DB Commodity Double Short ETN
DGZ - PowerShares DB Gold Short ETN
DRR - Market Vectors Double Short Euro ETN
DTO - PowerShares DB Crude Oil Double Short ETN
DTUS - iPath US Treasury 2-year Bear ETN
DTYS - iPath US Treasury 10-year Bear ETN
DZZ - PowerShares DB Gold Double Short ETN
EMSA - iPath Short Enhanced MSCI Emerging Markets Index ETN
IVOP - iPath Inverse S&P 500 VIX Short-Term Futures ETN
JGBS - PowerShares DB Inverse Japanese Government Bond Futures ETN
JGBD - PowerShares DB 3x Inverse Japanese Government Bond Futures ETN
MFSA - iPath Short Enhanced MSCI EAFE Index ETN
MLPS - UBS E-TRACS 1x Monthly Short Alerian MLP Infrastructure Total Return Index ETN
ROSA - iPath Short Extended Russell 1000 TR Index ETN
RTSA - iPath Short Extended Russell 2000 TR Index ETN
SBND - PowerShares DB 3X Short 25+ Year Treasury Bond Exchange Traded Note ETN
SFSA - iPath Short Extended S&P 500 TR Index ETN
SZO - PowerShares DB Crude Oil Short ETN
UDNT - PowerShares DB 3x Short US Dollar Index Futures ETN
XXV - Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN
XIV - VelocityShares Daily Inverse VIX Short Term ETN
ZIV - VelocityShares Daily Inverse VIX Mid Term ETN
Each of these investments are examples of some of the high-risk inverse ETFs and ETNs which are not suitable for unsophisticated, long-term investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Citigroup Global Markets Inc., Morgan Stanley, UBS Financial Services Inc. and Wells Fargo recently agreed to pay $9.1 million to settle allegations that they sold leveraged and inverse exchange-traded funds to clients who had no business investing in the complex instruments.
In its first actions against firms that put clients in these products, FINRA said the four wirehouses experienced supervisory failures and lacked a "reasonable basis" for recommending the securities to certain clients. Together, the firms bought and sold $27 billion of the nontraditional ETFs from January 2008 through June 2009, FINRA said.
The firms agreed to pay the fines of $7.3 million and restitution of $1.8 million without admitting or denying the allegations.
These sanctions are likely only the beginning as it is now clear that ETFs and ETNs are a significant problem for the brokerage industry.
In March 2010, the SEC stopped approving applications for ETFs that use derivatives and indicated that it wants to review whether additional investor protections are warranted, particularly for leveraged and inverse ETFs.
FINRA and the SEC's involvement in these products is a result of the leverage and risks associated with these investments and the concern that such investments can be confused with less risky and more traditional ETFs.
The more exotic ETFs are riskier because they reset daily and use leverage and compounding. Results of leveraged and inverse ETFs can differ significantly from the performance of the underlying index, especially when held for long periods of time and during volatile markets.
FINRA and the SEC published a joint investor alert in 2009 warning that leveraged and inverse ETFs are complicated investments that focus on meeting daily performance goals. The agencies said long-term performance is likely to be very different than the investment's stated daily objectives, and recommended that investors discuss the products with an investment professional.
The following is a list of some of the ETFs and ETNs currently available:
BGZ - Direxion Daily Large Cap Bear 3X Shares ETF
BIS - UltraShort NASDAQ Biotechnology ETF
BRIS - Direxion Daily BRIC Bear 3x Shares ETF
BXDB - Barclays Short B Leveraged Inverse S&P 500 Total Return ETN
COWS - Direxion Daily Agribusiness Bear 3x Shares ETF
DDG - Short Oil & Gas ProShares ETF
DGLD - 3x Inverse Gold ETN
DLBS - iPath US Treasury Long Bond Bear ETN
DMM - MacroShares Housing Down ETF
DNO - United States Short Oil ETF
DOG - Short Dow30 ProShares ETF
DOY - MacroShares $100 Oil Down ETF
DPK - Direxion Daily Devloped Markets Bear 3X Shares ETF
DSLV - 3x Inverse Silver ETN
DSTJ - JP Morgan 2X Short US Long Treasury Futures ETN
DSXJ - JP Morgan 2X Short US 10 Year Treasury Futures ETN
DUG - UltraShort Oil & Gas ProShares ETF
DUST - Direxion Daily Gold Miners Bear 3x Shares ETF
DXD - UltraShort Dow 30 ProShares ETF
EDZ - Direxion Daily Emerging Markets Bear 3X Shares ETF
EEV - UltraShort MSCI Emerging Markets ProShares ETF
EFU - UltraShort MSCI EAFE ProShares ETF
EFZ - Short MSCI EAFE ProShares ETF
ERY - Direxion Daily Energy Bear 3X Shares ETF
EUM - Short MSCI Emerging Markets ProShares ETF
EUO - ProShares UltraShort Euro ETF
EWV - UltraShort MSCI Japan ProShares ETF
FAZ - Direxion Daily Financial Bear 3X Shares ETF
FXP - UltraShort FTSE/Xinhua China25 Proshares ETF
GASX - Direxion Daily Natural Gas Related Bear 3X Shares ETF
GLL - UltraShort Gold ProShares ETF
INDZ - Direxion Daily India Bear 3x Shares ETF
IPAL - 2x Inverse Palladium ETN
IPLT - 2x Inverse Platinum ETN
KRS - Short KBW Regional Banking ETF
KOLD - UltraShort DJ-UBS Natural Gas ETF
LHB - Direxion Daily Latin America 3x Bear Shares ETF
MATS - Direxion Daily Basic Materials Bear 3X Shares ETF
MWN - Direxion Daily Mid Cap Bear 3X Shares ETF
MYY - Short MidCap400 ProShares ETF
MZZ - UltraShort MidCap400 ProShares ETF
PSQ - Short QQQ ProShares ETF
PST - ProShares UltraShort 7-10 Year Treasury ETF
QID - UltraShort QQQ ProShares ETF
QLD - Ultra QQQ ProShares ETF
REK - ProShares Short Real Estate ETF
RETS - Direxion Daily Retail Bear 3X Shares ETF
REW - UltraShort Technology ProShares ETF
RINF - ProShares 30 Year TIPS/TSY Spread ETF
RSW - Rydex Inverse 2x S&P 500 ETF
RUSS - Direxion Daily Russia Bear 3x Shares ETF
RWM - Short Russell2000 ProShares ETF
RXD - UltraShort Health Care ProShares ETF
SAGG - Daily Total Bond Market Bear 1x Shares ETF
SBB - ProShares Short S&P SmallCap600 ETF
SBM - ProShares Short Basic Materials ETF
SCC - ProShares UltraShort Consumer Services ETF
SCO - ProShares UltraShort DJ-AIG Crude Oil ETF
SDD - ProShares UltraShort SmallCap600 ETF
SDK - ProShares UltraShort MidCap Growth ETF
SDOW - UltraPro Short Dow 30 ETF
SDP - ProShares UltraShort Utilities ETF
SDS - ProShares UltraShort S&P500 ETF
SEF - Short Financials ProShares ETF
SFK - ProShares UltraShort Russell1000 Growth ETF
SH - ProShares Short S&P500 ETF
SICK - Direxion Daily Healthcare Bear 3X Shares ETF
SIJ - ProShares UltraShort Industrials ETF
SJB - ProShares Short High Yield ETF
SJH - UltraShort Russell2000 Value ProShares ETF
SJL - ProShares UltraShort MidCap Value ETF
SFK - UltraShort Russell1000 Growth ProShares ETF
SKK - UltraShort Russell 2000 Growth ProShares ETF
SMDD - UltraPro Short Mid-Cap 400 ETF
SMN - ProShares UltraShort Basic Materials ETF
SOXS - Direxion Daily Semiconductor Bear 3x Shares ETF
SPXU - ProShares Ultra Pro Short S&P 500 ETF
SQQQ - UltraPro Short QQQ ETF
SRS - ProShares UltraShort Real Estate ETF
SRTY - UltraPro Short Russell 2000 ETF
SSG - ProShares UltraShort SemiConductor ETF
SVXY - ProShares Short VIX Short-Term Futures ETF
SZK - ProShares UltraShort Consumer Goods ETF
TBF - ProShares Short 20+ Year Treasury ETF
TBT - ProShares UltraShort 20+ Year Treasury ETF
TBX - Short 7-10 Year Treasury ETF
TBZ - UltraShort 3-7 Year Treasury ETF
TLL - ProShares UltraShort Telecommunications ETF
TMV - Direxion Daily 30-year Treasury Bear 3x Shares ETF
TOTS - Direxion Daily Total Market Bear 1X Shares ETF
TPS - ProShares UltraShort TIPS ETF
TTT - UltraPro Short 20+ Year Treasury ETF
TWM - UltraShort Russell 2000 ProShares ETF
TYBS - Daily 20 Year Plus Treasury Bear 1x Shares ETF
TYNS - Daily 7-10 Year Treasury Bear 1x Shares ETF
TYO - Direxion Daily 10-year Treasury Bear 3x Shares ETF
TYP - Direxion Daily Technology Bear 3x Shares ETF
TZA - Direxion Daily SmallCap Bear 3x Shares ETF
TWQ - ProShares UltraShort Russell 3000 Index ETF
UDN - PowerShares US Dollar Bearish ETF
YCS - ProShares UltraShort Yen ETF
YXI - Proshares Short FTSE / Xinhua China 25 ETF
ZSL - ProShares UltraShort Silver ETF
AGA - PowerShares DB Agriculture Double Short ETN
BOM - PowerShares DB Base Metals Double Short ETN
DDP - PowerShares DB Commodity Short ETN
DEE - PowerShares DB Commodity Double Short ETN
DGZ - PowerShares DB Gold Short ETN
DRR - Market Vectors Double Short Euro ETN
DTO - PowerShares DB Crude Oil Double Short ETN
DTUS - iPath US Treasury 2-year Bear ETN
DTYS - iPath US Treasury 10-year Bear ETN
DZZ - PowerShares DB Gold Double Short ETN
EMSA - iPath Short Enhanced MSCI Emerging Markets Index ETN
IVOP - iPath Inverse S&P 500 VIX Short-Term Futures ETN
JGBS - PowerShares DB Inverse Japanese Government Bond Futures ETN
JGBD - PowerShares DB 3x Inverse Japanese Government Bond Futures ETN
MFSA - iPath Short Enhanced MSCI EAFE Index ETN
MLPS - UBS E-TRACS 1x Monthly Short Alerian MLP Infrastructure Total Return Index ETN
ROSA - iPath Short Extended Russell 1000 TR Index ETN
RTSA - iPath Short Extended Russell 2000 TR Index ETN
SBND - PowerShares DB 3X Short 25+ Year Treasury Bond Exchange Traded Note ETN
SFSA - iPath Short Extended S&P 500 TR Index ETN
SZO - PowerShares DB Crude Oil Short ETN
UDNT - PowerShares DB 3x Short US Dollar Index Futures ETN
XXV - Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN
XIV - VelocityShares Daily Inverse VIX Short Term ETN
ZIV - VelocityShares Daily Inverse VIX Mid Term ETN
Each of these investments are examples of some of the high-risk inverse ETFs and ETNs which are not suitable for unsophisticated, long-term investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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