Another law firm is piling on ProShares over one of its leveraged ETFs. On Monday the Law Offices of Howard G. Smith threw its hat into the fight over the woes of the UltraShort Real Estate ProShares fund. The suit, Novick vs. ProShares, was first filed last week by Ackerman, Link & Sartory and Labaton Sucharow. They accuse ProShares of creating a "false and misleading registration statement, prospectuses, and statements of additional information" for the ETF.

The suit stems from the UltraShort Real Estate ETF's performance pain last year. According to the plaintiffs' attorneys, the ETF fell 48.2 percent between January 2 and December 17, 2008, even though it was intended to provide twice the inverse of the daily performance of the Dow jones U.S. Real Estate Index, which fell 39.2 percent over the same period.

"The registration statement does not disclose that the SRS fund is altogether defective as a directional investment play," the class action firm writes in its complaint.

Of course, as ProShares and other leveraged index providers like Direxion and Rydex have constantly stressed, magnifying an index's returns daily or even monthly won't give the same returns as magnifying it over the course of a year.

The Law Offices of Howard G. Smith clearly wants in on the action that Ackerman and Labaton started. In its release, the Bensalem, Pennsvylania-based law firm reminds the ETF's investors that "no class has yet been certified" in the case and that investors "not represented by counsel unless [they] retain one." 

Edited by: Neil Anderson, Managing Editor


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