Unsuitable ETF Sales Lead to Restitution for Investors

by InvestorLawyers on January 21, 2014

in Arbitration,ETF,FINRA,Suitability

Securities fraud attorneys are currently investigating claims on behalf of customers of full-service brokerage firms for unsuitable sales of leveraged and inverse ETFs, or exchange-traded funds. On January 9, the Financial Industry Regulatory Authority (FINRA) announced that it ordered Stifel, Nicolaus & Co. Inc. and Century Securities Associates Inc. to pay $475,000 in restitution and $550,000 in fines regarding the sales of leveraged and inverse ETFs to 65 customers.

Unsuitable ETF Sales Lead to Restitution for Investors

Stifel and Century, both affiliate broker-dealers based in St. Louis, are owned by Stifel Financial Corp. According to stock fraud lawyers, leveraged and inverse ETFs are designed to meet daily objectives and “reset” each day. As a result, the performance of these investments can diverge from the performance of the underlying benchmark or index very quickly. Naturally, this problem is exacerbated in volatile markets.

According to securities fraud attorneys, because of the nature of these investments, leveraged and inverse ETF investors can suffer enormous losses, even if there is a gain in the index performance over the long-term.

“The complexity of leveraged and inverse exchange-traded products makes it essential for securities firms and their representatives to understand these products before recommending them to their customers,” FINRA Executive Vice President and Chief of Enforcement Brad Bennett stated. “Firms must also conduct reasonable due diligence on these and other complex products, sufficiently train their sales force and have adequate supervisory systems in place before offering them to retail investors.”

According to FINRA’s investigation, from January 2009 to June 2013, some Stifel and Century representatives did not fully understand the risks and features of leveraged and inverse ETFs and, as a result, made unsuitable recommendations to clients.   FINRA concluded that Stifel and Century allowed the recommendations and many customers suffered significant losses because of the unsuitable recommendations.

If you suffered significant losses as a result of the unsuitable recommendation of inverse and leveraged ETFs by Stifel, Century or another full-service brokerage firm, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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