According to Bloomberg, the $45,000 loss suffered by Jeff Steckbeck in TVIX, a Credit Suisse Group AG note, has set off a probe by the Securities and Exchange Commission. Reportedly, ETNs became more popular with the TVIX in February 2012. That month, Credit Suisse stopped selling the ETN and rising demand caused the investment to veer up to 89 percent from the index. When Credit Suisse began issuing the notes again in March of that year, a FINRA warning cautioned investors that ETNs could trade at a price that was higher than their underlying index.

Bloomberg data indicates that the estimated initial value of the securities is typically 2 to 4 percent less than the price investors paid. Exchange-traded notes like TVIX mimic assets through the use of derivatives and their value is based on volatility shifts in the market. However, the ETN market is small beans compared to the ETF market, which has around $2.4 trillion in assets.

In addition, the Securities and Exchange Commission recently announced that it will reconsider a 2008 rule proposal regarding ETFs. Reportedly the proposal will address the underlying and direct instrument transparency, differences between active and index funds, creative flexibility and inverse leverage. Reportedly, unauthorized trading and the unsuitable sale of inverse and leveraged ETFs increased following the 2008 economic downturn. As a result, securities arbitration lawyers have filed numerous arbitration claims on behalf of investors who suffered significant losses in inverse and leveraged ETFs.

If you purchased unsuitable ETFs or ETNs from Credit Suisse or another full-service brokerage firm, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

According to securities arbitration lawyers, even ETFs with a long-term gain in index performance can result in significant losses for investors. When markets are volatile, the problem is often exacerbated. As a result, ETFs are unsuitable for many investors.

Reportedly, the Financial Industry Regulatory Authority recently ordered J.P. Turner & Co. to pay restitution to 84 clients regarding the unsuitable recommendation and sale of inverse and leveraged ETFs. J.P. Turner did not admit or deny the charges but agreed to pay $707,559 in restitution to settle the charges. The charges also included allegations of excessive mutual fund switches, failure to provide adequate training regarding ETFs and failure to implement an adequate supervisory system.

FINRA also alleges that J.P. Turner allowed registered representatives to recommend these investments without performing due diligence regarding the suitability of these investments to at least 27 customers. These clients reportedly included investors and retirees with conservative risk tolerances. In addition, J.P. Turner is accused of conducting 2,800 unsuitable mutual fund switches, despite red flags. Allegedly, the switching resulted in more than $500,000 in commissions and sales charges paid by 66 clients.

According to investment fraud lawyers, firms have an obligation to fully disclose all the risks of a given investment when making recommendations. In addition, those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. If a firm fails to make suitable recommendations, investors may be able to recover losses through FINRA arbitration.

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

The U.S. District Court for the Southern District of New York recently dismissed the class action lawsuit that was reportedly filed in 2009. According to securities arbitration lawyers, reports indicated that the plaintiffs’ claims that certain risks were omitted from the registration statements disclosures were rejected by the courts. Reportedly, these omitted risks were associated with holding inverse and leveraged exchange-trade funds, or ETFs, for periods exceeding one day.

In a warning issued by FINRA, the regulatory authority stated that leverage inverse ETFs are unsuitable for ordinary investors and that these investments should be held for a short time period only. Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market, or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level. For more information on ETFs and ETNs, see the previous blog post, “Investors Could Recover Losses from their Inverse ETF and ETN Investments.”

Following the dismissal of the class action lawsuit, investors who suffered losses as a result of their investment in the ProShares ETF are seeking alternative methods for recovering their losses. Those investors can contact a securities fraud attorney about filing a Financial Industry Regulatory Authority arbitration claim against the broker-dealer or financial advisor that recommended the investment. In many cases, firms, brokers and/or advisors can be held liable for investor losses if they failed to fully disclose the risks associated with the investment or recommended an investment that was unsuitable for the investor.

If you suffered losses in ProShares exchange-traded funds, you could recover your losses through securities arbitration. 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.