Gilman and Pastor LLP have filed a class action lawsuit in the U.S. District Court for the District of Maryland on behalf of investors who purchased the ProShares UltraShort MSCI Emerging Markets Fund (EEV), alleging that ProShares issued “false and misleading Registration Statement, Prospectuses, and Statements of Additional Information.” The complaint goes on to allege that the defendants (including ProShares and several key executives) failed to disclose that “the EEV fund is altogether defective as a securities product and as directional investment play (sic).” [click to continue…]
In a step apparently intended to calm some of the fury surrounding the sale and use of leveraged ETFs, the Financial Industry Regulatory Authority (FINRA) announced Tuesday that it will raise margin requirements for leveraged ETFs beginning December 1. Regulatory Notice 09-53 states that “in view of the increased volatility of leveraged ETFs compared to their non-leveraged counterparts, FINRA believes higher margin levels are necessary.” [click to continue…]
Leveraged ETFs have taken a beating in the financial presses lately, mostly the result of misconceptions about the intended uses and users of these funds. Most of the criticism has focused on the performance of leveraged ETFs when held for multiple trading sessions. Because leveraged ETFs seek to amplify the return on their underlying benchmarks [...]
Following weeks of nonstop debate, subpoenas, warnings, lawsuits, and restrictions, an eerie silence overcame the leveraged ETF controversy. I had hoped that some progress had been made in dispelling some of the myths surrounding leveraged ETFs, and that perhaps investors had come to their senses and grasped the intended uses (and potential abuses of leveraged [...]
Once the lawyers get a hold of a juicy,well-publicized story of the middle class apparently done wrong, there’s no telling how far they’ll take it or how deep they’ll sink their teeth in. In the case of the most recent leveraged ETF controversy, it seems that there are a number of firms following a “file [...]
I suppose we should have known that it was only a matter of time. The Miami-based securities law firm of Dimond Kaplan & Rothstein, P.A. announced yesterday that it is “investigating claims involving investment losses in leveraged and short exchange traded funds.” Among the broker-dealers mentioned specifically as having sold leveraged ETFs are Merrill Lynch, [...]
The leveraged ETF issue has become a runaway freight train, picking up momentum with alarming pace and blowing through troublesome roadblocks such as common sense, rational financial analysis, and a little bit of research. Fidelity Investments is the latest to warn against the use of leveraged ETFs, publishing a warning to clients on its web [...]
Leveraged ETFs have been in the news a great deal lately, although the majority of the coverage has been less than flattering. Over the last week, several prominent financial institutions have ceased purchasing leveraged ETFs on behalf of their clients, citing the incompatibility of the short-term nature of these products with their long-term views on [...]
The controversy over leveraged ETFs continues to intensify, thanks in no small part to the efforts of Massachusetts’ Secretary of the Commonwealth William Galvin. Last month, Massachusetts announced that it was commencing an investigation into the sales and marketing practices of leveraged ETF issuers, noting that “it is important that retail investors be provided with [...]
ProFunds Group, the parent company of the ProShares line of leveraged and inverse ETFs, has stepped up its defense of its products it the wake of increased scrutiny of their performance and news that a number of brokerages (including Edward Jones, Ameriprise, and UBS) have suspended the purchase of such products on behalf of their [...]
What started last week in St. Louis has set off a domino effect throughout the country. Following the announcement of Edward Jones’ decision to cease offering leveraged ETFs, a number of other firms have distanced themselves from these controversial products:
Direxion, best known as the leading provider of 3x leveraged and inverse leveraged ETFs, is apparently planning to diversify its product line a bit. The Newton, Massachusetts-based ETF provider has amended a previous filing with the SEC, requesting regulatory approval to launch a 130/30 ETF. Leveraged ETFs have come under fire lately, and while there [...]
