Investor Lawyers Blog
Stock fraud lawyers are investigating claims on behalf of investors who suffered losses as a result of their investment in the TVIX ETF. It is possible that brokerage firms who recommended this high-risk, complicated product could be held liable for their clients’ losses.
Traditional, conservative ETFs have become very popular and, as a result, some unsophisticated investors may have invested in the very risky TVIX ETF, believing it to be a traditional ETF. However, TVIX, the VelocityShares Daily 2x VIX Short-Term ETN, is linked to an index that is made up of front month futures and offers leveraged exposure to VIX contracts.
The total share price of TVIX went down 29.3 percent on March 22, 2012. Following this drop, investors frantically sold off their positions and the next trading day saw 29.8 percent losses. At that time, TVIX was trading at $7.16 per share, a dramatic decline from the closing price before the initial drop, which was $14.43 per share. After closing on the second day, net losses amounted to a little over 50 percent. According to securities fraud attorneys, many investors suffered significant losses in a matter of hours.
ETFs and ETNs have recently gained a significant amount of attention in the securities industry. Numerous arbitration claims have been filed on behalf of investors who were unsuitably recommended ETFs or ETNs and suffered significant losses as a result. The TVIX ETF is likely one of these products. The Financial Industry Regulatory Authority has started to increase its efforts in regulating inverse ETFs and ETNs, hoping to ensure that unsophisticated investors are not being sold these complicated products. According to securities fraud attorneys, the higher risk of leveraged and inverse ETFs is a result of the fact that they use leverage and compounding and they reset daily. These investments’ performance can be significantly different from the underlying index’s performance.
If you were unsuitably recommended the TVIX ETF, or another leveraged ETF or ETN, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.