Soreide Law Group, PLLC, is currently investigating the marketing and sales of non-traditional exchange traded funds (ETFs) to investors. Many of the country’s leading banks – including Citigroup, Morgan Stanley, UBS and Wells Fargo – were recently sanctioned by the Financial Industry Regulatory Authority (FINRA) for more than $9.1 million over their failure to supervise retail sales of leveraged and inverse exchange-traded funds (ETFs).
In addition to supervisory failures, FINRA said the banks failed to have “a reasonable basis” for recommending the products to investors.
“The added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers,” said J. Bradley Bennett, FINRA enforcement chief, in a statement.
“Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products,” he added.
The fines were issued as follows:
Wells Fargo – $2.1 million fine and $641,489 in restitution
Citigroup – $2 million fine and $146,431 in restitution
Morgan Stanley – $1.75 million fine and $604,584 in restitution and
UBS – $1.5 million fine and $431,488 in restitution.
Both the Securities and Exchange Commission (SEC), the North American Securities Administrators Association and FINRA have issued separate and joint warnings to investors about leveraged and inverse exchange-traded funds in recent months.
Regulators are concerned about the increasing complexity of the products, their lack of transparency, and the potential to cause significant financial losses to the investors who do not completely understand how inverse and leveraged funds actually work.
Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you have sustained investment losses due to your stock broker or financial advisor’s recommendations regarding ETFs, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: https://www.securitieslawyer.com.