Investor Lawyers Blog
Following the dismissal of the class action lawsuit against ProShares, securities fraud attorneys are investigating potential claims on behalf of investors who suffered significant losses as a result of their investment in the ProShares leveraged and inverse exchange-traded funds.
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.”