An investment adviser must pay a total of $1.8 million to a group of investors in a securities arbitration ruling that lawyers say is among the first to involve losses tied to leveraged and inverse exchange-traded funds, reports Reuters
Nicholas Rowe and his firm, Focus Capital Wealth Management Inc.
of Bedford, New Hampshire, were found liable in a case alleging negligence, civil fraud, and other misdeeds, involving the sale of risky ETFs to nine investors, according to a ruling by a Financial Industry Regulatory Authority (Finra)
arbitration panel. Some of the investors were in their fifties and sixties, including two widows.
The newswire reports that leveraged and inverse ETFs are designed to amplify short-term returns by using debt and derivatives and are considered more suitable for professional traders than for long-term retail investors or anyone who cannot tolerate a high-risk portfolio. Only a handful of cases involving the securities are pending, say arbitration lawyers. But that figure is likely to grow, say lawyers, as investors dabble in such ETFs to attain higher yields in a low-interest environment. Many investors do not understand the magnitude of the risks, lawyers say, according to Reuters
To learn more about this legal trend, go to Reuters
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