Malecki Law Announces Investigation into Leveraged and Inverse ETFs

November 2, 2011

Malecki Law is currently investigating Financial Industry Regulatory Authority (FINRA) brokerage firms who have advised customers to purchase leveraged and inverse ETFs (Exchange Traded Funds), including those issued by Direxion, ProFunds (ProShares) and Rydex. Some of these ETFs trade under the symbols FAS, FAZ, UPRO, SDOW, SPXU, UDOW, RSU and RSU, among many others.

From 2007 through 2010, the market for inverse and leveraged ETFs such as these has grown from $1 billion to $30 billion, in large part due to these products being solicited in the accounts of normal, unsophisticated investors.

These products are highly complex, using various trading strategies in an attempt to deliver their promised returns, and are oftentimes not suitable for the investment portfolio of a conservative or retired investor.

Unfortunately, many brokers and brokerage firms fail to properly inform their clients about the complex nature of these investments and the associated risks involved. Hence, these investors do not understand the complex structure of the investment or the risks involved. Since these products are highly leveraged and structured to perform only in the very short term, they generally only suitable for speculative day trading, not long-term investment.

Compounding the problem with these investments is the use of margin in an investors account by his or her stock broker. By borrowing on margin to purchase leveraged ETFs, an investor can be exposed to extreme risk and market volatility. Such volatility could result in the investor receiving a margin call, which if not met, can devastate the account.

It is the right of any and all investors who believe they may have suffered losses to contact our offices to explore their legal rights and options. If you or a family member suffered losses in leveraged or inverse ETFs, such as those listed above, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation.