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What if I lost money in ETFs? 

Exchange Traded Funds (ETFs) continue to dominate the news as the hottest investment in Wall Street. In fact, many of them are great, they combine wide diversification with low costs, an excellent recipe for individual investors. Inevitable with the creation of something useful, is the variations on that thing. In this case it is a series of products called "Non-Traditional ETFs" or "Leveraged and Inverse ETFs".

If you were sold leveraged or inverse ETFs, you may have a claim to recover those losses from the broker-deal that sold them to you.  

Recovering Investment Losses

If your broker engages in making risky investment recommendations that are not appropriate for you, you may have a claim to recover your losses. The Securities Fraud team at Halling & Cayo, S.C. can help you determine whether you are eligible to pursue a claim. 

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These Non-Traditional ETFs are only intended to be held for a short time period, usually a day, and are not designed to match the performance over time of the index they track.

Leveraged ETFs are intended to deliver a multiple of the index or benchmark they track, such as two times the daily performance of the S&P 500. Inverse leveraged ETFs are intended to deliver an inverse multiple of the index or benchmark they track, such as twice the opposite of the daily performance of the S&P 500.These Non-Traditional ETFs are intended to be held for a single day as part of a complex trading strategy by sophisticated investors, such as hedge funds. 

These investments are per se unsuitable for retail investors who plan to hold them for longer than one trading session.

Indeed, non-traditional ETFs are so complex, speculative, and risky that FINRA is concerned about the suitability of their sales to pension plans because “even institutional customers that have the general capability to assess risk” may not be able to understand them.  FINRA Regulatory Notice 07-43.

What we have found is exactly what the SEC has expressed as a concern, that investors have an expectation that the ETFs will perform in the long term the same as their daily stated goal. They won't. https://www.sec.gov/investor/pubs/leveragedetfs-alert.htm

This means that even if the underlying market performs in the direction you hope, given the leverage and daily reset of these products, you might get the opposite result.

The SEC put together examples to explain what is known in the industry as the tracking error, but basically given the way these are leveraged, any volatility could cause losses even when you expect gains. It gets worse and magnifies the more there are changes in the price of the underlying stocks. There is no reason for any broker to be selling individual investors these non-traditional ETFs as part of a buy and hold strategy. If you own any of these ETFs, or others like them, and have suffered losses, you may have a claim to recover those losses. Give us a call to discuss your case. 

Examples of these products include

TQQQ Proshares UltraPro QQQ
SSO ProShares Ultra S&P 500
FAS Direxion Daily Financial Bull 3X shares
FLGE Credit Suisse FI Large Cap Growth Enhanced ETN
QLD ProShares Ultra QQQ
UPRO ProShares UltraPro S&P 500
FBGX UBS AG FI Enhanced Large Cap Growth ETN
FIHD UBS AG FI Enhanced Global High Yield ETN
NUGT Direxion Daily Gold Miners Bull 3X Shares
UYG ProShares Ultra Financials
SPXL Direxion Daily S&P 500 Bull 3X Shares
SDS ProShares UltraShort S&P 500
JNUG Direxion Daily Junior Gold Miners Index Bull 3X Shares
TNA Direxion Daily Small Cap Bull 3X Shares
UDOW ProShares UltraPro Dow30
FIEE UBS AG FI Enhanced Europe 50 ETN
SOXL Direxion Daily Semiconductor Bull 3X Shares
TECL Direxion Daily Technology Bull 3X Shares
SPXU ProShares UltraPro Short S&P 500
TZA Direxion Daily Small Cap Bear 3X Shares
DUST Direxion Daily Gold Miners Bear 3X Shares
SQQQ Proshares UltraPro Short QQQ
YANG Direxion Daily China 3X Bear Shares
LABD Direxion Daily S&P Biotech Bear 3X Shares
RUSS Direxion Daily Russia Bear 3X Shares
BZQ ProShares UltraShort MSCI Brazil
ZBIO ProShares UltraPro Short Nasdaq Biotechnology
FXP ProShares UltraShort China 50
EDZ Direxion Daily Emerging Markets Bear 3X Shares
SPXS Direxion Daily S&P 500 Bear 3X ETF
SH ProShares Short S&P 500

MessageOur Staff

At The Securities Lawyers, you get hands-on involvement from a partner level attorney. If I'm on your case, there will be associates and paralegals assisting, but I will be the one trying your case, negotiating settlements, and mediating your case. Sean M. Sweeney

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Milwaukee Office

320 E Buffalo St
Ste 611
Milwaukee, WI 53202

Open Today 8:00am - 5:00pm

Open Saturday and Sunday for calls and emails.

More Info Directions (414) 755-5020