Losses Resulting from Unsuitable Recommendation of ETFs Could be Recoverable

by InvestorLawyers on January 31, 2013

in Arbitration,ETF,Securities Fraud,Suitability

Investment fraud lawyers are currently investigating claims on behalf of investors who have suffered significant losses in exchange traded funds, or ETFs. Exchange traded funds are similar to stocks in that they are investment funds traded on stock exchanges. These types of investments hold stocks, bonds, commodities or other assets. Throughout the trading day, an ETF trades close to its net asset value and most of these investments track a stock or bond index.

Losses Resulting from Unsuitable Recommendation of ETFs Could be Recoverable

Securities arbitration lawyers say that because of the low-cost, stock-like features and tax efficiency, ETFs are attractive to many investors. However, there are risks associated with ETFs that may make them unsuitable for some investors. In 2012, many ETFs suffered declines that resulted in investor losses. According to investment fraud lawyers, investors suffered losses anywhere from 22-90 percent in exchange traded funds.

The following is a list of ETFs that declined in 2012:

  • C-Tracks ETN Citi Volatility Index Total Return fell 90 percent
  • Market Vectors Solar Energy ETF fell 31 percent
  • DJ-UBS Natural Gas Subindex Total Return ETN fell 23 percent
  • Market Vectors Coal ETF fell 21 percent
  • Dow Jones-UBS Coffee ETN fell 43 percent
  • Gold Explorers ETF fell 32 percent
  • Pure Beta Softs ETN fell 24 percent
  • Global Carbon ETN fell 22 percent

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. Because of the risks associated with ETFs, these investments may not have been suitable for many individuals who received ETF recommendations from full-service brokerage firms. In addition, investment fraud lawyers say that some investors may not have been made aware of the risks associated with ETFs.  In some cases, these risks can include losses several times larger than losses in the underlying assets held by the fund due to the use of borrowed money by the ETF to purchase assets. 

If your full-service brokerage firm recommended ETFs for investment that were unsuitable for you and you suffered significant losses as a result, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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