ETRACS ETN (HOML) Mandatory Redemption

ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (HOML) Mandatory Redemption on March 12, 2020

Have you suffered losses investing in ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (HOML)? If so, The White Law Group may be able to help you recover your losses by filing a FINRA arbitration claim against the brokerage firm that sold you the investment.

According to reports this week, close to 30 leveraged and inverse exchange-traded products had been delisted, closed or automatically accelerated; or their issuers had announced that they would be doing so soon.

Unfortunately for investors, ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN has reportedly experienced a mandatory redemption after the indicative value fell below 60% from previous monthly valuation on March 12, 2020.

Mandatory Redemption

Most of the ETNs that closed in the past two weeks were mandatory redemptions, meaning the issuer was being forced by the clauses set forth in the prospectus to redeem the note early, before its intended closure date. Further, most of these ETNs weren’t intended to be closed for another twenty years or more.

When the ETN’s price falls below the minimum indicative value during open market hours, a mandatory redemption is triggered.

If the minimum indicative value is struck, the issuer must automatically move up the closure date from when it was previously scheduled and pay investors some amount of cash called the “acceleration amount.” In this case, investors shouldn’t expect to get their entire investment back, or even most of it.

Recovery of Investment Losses

The White Law Group continues to investigate the liability that brokerage firms may have for recommending complex and risky ETNs like HOML to investors.

An exchange-traded note (ETN) is a senior, unsecured, unsubordinated debt security issued by an underwriting bank. Similar to other debt securities, ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are designed to provide investors access to the returns of various market benchmarks.

Many of these investments are packaged as a way for investors to avoid the volatility of the market or capture growth in a particular sector.  In reality, these structured investments are just ways for the industry to increase revenues generated from the creation, sale, and management of these products.

Financial professionals and brokerage firms have a duty to recommend only investments that are appropriate for the client based on the client’s age, investment experience, net worth, and investment objectives.

If your financial advisor has over-concentrated your assets in any sector or investment, particularly one as volatile as the ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (HOML) and you suffered substantial losses, you may have a claim to recover your losses through FINRA arbitration.

For a free consultation with a securities attorney, please call 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.