Exchange Traded Funds

As United States Oil Fund Plunges 30%, Retail ETF Investors Should Worry About Losses

Published on: April 24, 2020 | by Shepherd Smith Edwards & Kantas, LLP

ETF Investors Of United States Oil Fund May Not Have Known Full Extent Of Risks

Our investment fraud lawyers are offering free case consultations to investors who’ve lost money in the United States Oil Fund (USO) after it dropped 30%. The exchange-traded security continues to make changes to its structure in an attempt to stave off more losses. Part of this now involves giving itself the leeway to get into long-term contracts. The USO exchange-traded fund (ETF), which keeps track of oil prices, is popular among retail investors.

Unfortunately, many of these investors think they are betting on oil prices’ long-term rise and do not fully comprehend how the futures market operates or that these types of funds hold primarily short-dated oil futures contracts and should never be held long-term.

Market Volatility Caused by COVID-19 Negatively Impacts Leveraged ETNs & Inverse ETPs

Published on: April 13, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Inverse and Leveraged ETNs and ETFs Are Shuttering

As the novel coronavirus (COVID-19) continues to adversely affect the markets and cause crude oil prices to drop, the number of inverse and leveraged exchange-traded notes (ETNs), exchange-traded funds (ETFs) and exchange-traded products (ETPs) involving crude oil that have been forced to close, delist, or automatically accelerate continues to grow and this has caused more losses for investors.

Right now, our broker fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) are working with leveraged and inverse ETF and ETP investors throughout the US to help them explore their legal options.

Wells Fargo Settles Inadequate Supervision of Non-Traditional ETFs Claim for $35M

Published on: March 4, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Wells Fargo Sold Non-Traditional ETFs to Retail Investors

If you were an investor who suffered losses in non-traditional exchange-traded funds (ETFs) that you feel were unsuitable for you yet were recommended by a Wells Fargo investment advisor or broker, our ETF fraud attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm) would like to offer you a free case consultation.

Wells Fargo Advisors Financial Network and Wells Fargo Clearing Services recently agreed to pay $35M to settle US Securities and Exchange Commission (SEC) claims. These claims accused the two Wells Fargo entities of lax supervision of their registered investment advisors (RIAs). As well as the brokers who recommended certain complex non-traditional ETFs to retirees and other retail advisory and brokerage customers.

Shepherd Smith Edwards and Kantas Investigates Investor Claims Involving Non-Traditional ETFs

Published on: February 7, 2020 | by Shepherd Smith Edwards & Kantas, LLP

Non-Traditional Exchange-Traded Funds Are Not Suitable For Every Investor

Our securities fraud attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm) are looking into complaints by investors whose brokers may have inappropriately recommended that they invest in non-traditional exchange-traded funds (ETFs).

These types of ETFs are leveraged, inverse and inverse-leveraged exchange-traded funds and they are not for every investor. This is definitely the type of investment that a financial representative and its broker-dealer should assess for suitability on a customer-by-customer basis.

Shepherd Smith Edwards and Kantas Investigates Kalos Capital Broker Darren Kubiak Over GPB Investments and Exchange-Traded Funds Sales

Published on: December 17, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Kalos Capital Broker Sold GPB Private Placements and LIETFs

Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is investigating customer complaints involving Darren Michael Kubiak, a Kalos Capital broker who is currently suspended from the industry for three months. Kubiak is one of the Kalos representatives who sold GPB Capital Holdings private placements to investors. GPB is accused of operating a $1.8B Ponzi scam.

Kubiak Suspended By FINRA

Financial Sherpa Accused of Cherry Picking

Published on: September 2, 2019 | by Shepherd Smith Edwards & Kantas, LLP

In a settlement reached with the US Securities and Exchange Commission (SEC), Financial Sherpa and its principal James L. Beyersdorf will pay more than $232K of disgorgement, over $15K of prejudgment interest, and a $188K penalty for allegedly defrauding investment advisory clients by engaging in a cherry picking scam. The regulator contends that Beyersdorf allocated a disproportionate amount of option trades that were profitable to himself and his wife while distributing the unprofitable ones to the firm and his clients. Beyersdorf oversaw some $6.7M in assets for 13 individual investors.

According to the SEC, he purchased options in the firm’s omnibus trading account during the morning, distributing the trades later in the day. The regulator claims that because of the allegedly illegal trading, over six months– from October 2017 and April 2018– Beyersdorf and his wife ended up with a net positive one-day return of more than 45% on the options trades that were sent to their accounts. Meantime, the negative one-day return for the firm’s individual clients that received the unprofitable trades was also 45%. The Commission said that the odds of the “disparate performance” occurring by chance was under one-in-a million.

Also, while the registered investment advisory’s strategy for the majority of its clients involved placing about 90% of each of their assets in exchange-traded funds (ETFs) and 10% in short term options trading, the account of Beyersdorf’s wife traded nearly exclusively in options and did not hold any ETF positions.

Texas Fines Investment Advisor for Failure to Supervise, UXVY ETF Losses

Published on: August 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Texas State Securities Board is ordering William H. Lowell, the president of Lowell & Co., to pay a $40K fine after he allegedly failed to properly supervise one of his firm’s ex- financial representatives. The formerly registered broker and investment advisor, Jody Bryant Bowers, allegedly lost nearly all of the assets in two client accounts after holding onto an exchange traded fund (ETF) for too long.

According to the state’s disciplinary order, Bowers bought and sold Proshares Ultra VIX Short-Term Futures ETF (UXVY) shares, which she “exclusively” traded in in the accounts of certain clients. This type of fund makes money through S&P 500 Index volatility, benefiting when there is a drop in the index.

Because the UXVY ETF is a leveraged exchange-traded fund that is a high-risk and costly investment, it is intended for short-term trading and must be monitored every day. However, Bower allegedly disregarded the warnings that were in the ETF’s prospectus and proceeded to hold on to positions in UVXY in two client accounts for too long, including 11,000 shares in one client’s account that were held there for 987 days. This caused the loss of 93% of that client’s initial investment. Bower also allegedly held on to 2,000 UXVY shares in another client’s account for 356 days, causing a 93% loss on the initial investment.

Ex-America Northcoast Securities Broker Barred For Unsuitable ETF Trades

Published on: May 21, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A former America Northcoast Securities broker is barred by the Financial Industry Regulatory Authority (FINRA) after he traded in non-traditional exchange-traded funds (ETFs) in the accounts of firm clients, even when the investments were not suitable for them.

According to the self-regulatory authority (SRO), Dominic Anthony Tropiano solicited the buying and selling of leveraged ETFs in at least 47 America Northcoast Securities customers’ accounts between 5/2015 and 4/2016, including 866 securities transactions involving 15 non-traditional exchange-traded funds.

Of these transactions, 33 of them were purportedly conducted in just one customer’s account. Another 19 took place in another client’s account. The customers were not aware these transactions were going to occur and they did not give their consent.

Securities Cases: Goldman Sachs Investors Can Proceed with $13B CDO Fraud Litigation, Deutsche Bank Resolves Self-Dealing Lawsuit for $21.9M, and Elkhorn Capital Group Founder is Accused in $2.5M ETF Fraud

Published on: August 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Shareholders Can Proceed with $13B CDO Fraud Case Against Goldman Sachs

A US district court judge has given Goldman Sachs (GS) shareholders the right to move forward with their $13B collateralized debt obligation fraud lawsuit accusing the bank of not disclosing certain conflicts of interest. Judge Paul A. Crotty granted the investors’ case class action certification.

The CDO fraud lawsuit revolves around investments that Goldman Sachs created and sold prior to the collapse of the housing market. According to the plaintiffs, the bank made false and misleading statements and acted counter to clients’ best interests.

Judge Says Ex-F-Squared CEO Must Pay More Than $13M Related to AlphaSector Strategy and ETF Fraud

Published on: March 22, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Howard Present, the ex-CEO and cofounder of F-Squared Investments, must pay more than $13M—nearly $11M of disgorgement, almost $1.4M of interest and a nearly $1.6M penalty. The final judgement, issued by U.S. District Judge Leo Sorokin in Boston, comes after a federal jury found Present liable for the false and misleading statements made to investors.

It was in 2014 that the US Securities and Exchange Commission charged Present and his investment management firm with misleading investors about its AlphaSector strategy. At the time, F-Squared was the biggest market of index products that use exchange-traded funds.

The SEC accused F-Squared of false advertising related to its touting of a “successful seven-year track records” for its AlphaSector strategy that it claimed was based on real investments, real clients, and real performances, when, in fact, the algorithm that the company claimed to use didn’t even exist during that time period of this supposed success. Instead, the data that the F-Squared marketed was a product of backtesting—not real testing—even though Present and his firm specifically stated that their AlphaSector strategy had not been backtested.