There is more and more evidence surfacing that leveraged and inverse ETF’s are finding there way into the portfolios of mainstream America. The problem is most experts believe such products are only suitable for about 1% of all individual investors. Yet the products are aggressively marketed by brokerage firms and the amount of money flowing into these funds is skyrocketing.
This relatively recent phenomenon has not escaped the attention of Financial Industry Regulatory Authority (FINRA) officials who last year fined four major firms over $9 million dollars…a drop in the bucket versus what they firms likely made in related commission and fee income from the 27 billion dollars in ETF transactions. The firms fined were Morgan Stanley, Citigroup, Well Fargo and UBS AG and were resulted from what regulators termed improper supervision of the sales people and the general unsuitability of the products.
Given the size of the fines versus the size of the transactions and profit potential, it is unlikely this action will chill the growth of these esoteric and potentially hazardous financial vehicles. Please contact Colling Gilbert Wright & Carter for additional information.