Morgan Stanley: Fined $8 Million for Single-Inverse ETF Investments

Concerned about investment losses in Morgan Stanley single-inverse ETF Investments?

Have you suffered losses investing in Morgan Stanley single-inverse ETF investments? If so, The White Law Group may be able to help you recover your losses through FINRA Arbitration.

Yesterday the SEC announced that Morgan Stanley Smith Barney will pay $8 million penalty and admit wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.

According to the SEC, Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.  The SEC states Morgan Stanley failed to obtain signed client disclosures from several hundred clients.

The disclosure stated that single inverse ETFs are typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  Morgan Stanley allegedly solicited clients to purchase single inverse ETFs in retirement and other accounts. Unfortunately for investors, the securities were held long-term, and many of the clients experienced losses.

Among other compliance failures, Morgan Stanley did not monitor the single-inverse ETF positions on an ongoing basis and did not ensure that certain financial advisers completed single inverse ETF training.

Risks of Leveraged and Inverse ETFs

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. Many investors do not understand the magnitude of the risks of leveraged and inverse ETFs and believe that they are more akin to a normal ETF — which is designed to simply mirror the performance of an underlying index, like the S&P.

FINRA and other regulators began issuing warnings about the sale of leveraged and inverse ETFs in 2009. There were concerns that securities brokers were selling them to buy-and-hold investors – a strategy likely to cause heavy losses due to the enormous fluctuations that are experienced by these extremely short term investments.

The White Law Group continues to investigate FINRA arbitration claims involving leveraged and inverse ETFs.  The brokerage firms and financial professionals that sold these products may have liability for failure to adequately disclose the risks of these products.

Free Consultation

If you suffered losses in a leveraged or single-inverse exchange-traded fund and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 888-637-5510.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.