How ETF Investment Names May Try to Trick You

by InvestorLawyers on May 4, 2012

in FINRA,Hedge Funds,Securities Fraud,Suitability

Stock fraud lawyers are reviewing some ETFs, or exchange-traded funds, that employ misleading names that do not accurately reflect their true nature. This reflects a major problem in today’s securities industry, according to securities fraud attorneys. The packaging of these investments appears to the investor to avoid the volatile market; but, in actuality, they are only geared towards increasing revenue. The following is a list of ETFs that don’t actually invest in the way their name indicates, according to Casey Research:

How ETF Investment Names May Try to Trick You

· iShares MSCI Emerging Markets Eastern Europe Index Fund (ESR) — While the name implies that the fund invests throughout eastern Europe, the reality is that three-quarters of the funds assets are allocated to Russian companies, while few are in the rest of eastern Europe.
· ProShares Hedge Replication (HDG) Fund — While the name indicates hedge fund performance and strategies replication, 82 percent of the fund’s assets are actually held in three-month U.S. Treasury Bills.
· Vanguard MSCI Pacific ETF (VPL) — In this fund, 62 percent is allocated to Japan and 25 percent to Australia, even though the name implies the fund is invested throughout the Pacific.
· iShares MSCI Pacific Ex-Japan (EPP) Fund — Again, while implying the fund is invested widely in the Pacific, 65 percent is actually held in Australia, while only a small amount is held in Hong Kong and Singapore.
· Asia-Pacific Ex-Japan Portfolio (PAF) — While this name carries the same implications about the Pacific as EPP and VPL, 36 percent of the fund is allocated in South Korea.
· United States Oil Fund (USO) — This fund, originally meant to follow WTI crude oil prices, does not hold any oil but, rather, maintains futures market positions.
· United States Natural Gas Fund (UNG) — Like USO, UNG holds futures contracts, not natural gas, as the name implies.
· PIMCO Build America Bond Strategy ETF (BABZ) — While the name implies the fund invests throughout the entire United States, almost 7 percent is allocated in only four states: Illinois, New York, New Jersey and California. Furthermore, these four states issue more bonds and have more budget problems than most.

Prior to recommending an investment to a client, brokers and firms are required to perform the necessary due diligence to establish whether the investment is suitable for the client given their age, investment objectives and risk tolerance. According to stock fraud lawyers, even if your broker was unaware of the misleading nature of these titles, he or she may still be held liable for failure to perform the necessary due diligence.

If you have suffered losses as a result of your investments in any of the above ETFs, and feel your financial professional misrepresented the fund’s investment strategy or did not perform adequate due diligence on the fund’s underlying assets, you may have a valid FINRA securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Previous post:

Next post: