Fellows Hymowitz Rice, Safirstein Metcalf LLP and the Law Office of Kevin Galbraith LLC announce that FINRA has recently fined Oppenheimer & Co. Inc. (“Oppenheimer”) $2.25 million and ordered the firm to pay restitution of more than $716,000 to affected customers for selling leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs) to retail customers without reasonable supervision, and for recommending non-traditional ETFs that were not suitable.
The Financial Industry Regulatory Authority (FINRA), and the U.S. Securities and Exchange Commission (SEC), both issued investor alerts in 2009 to warn investors about investing in leveraged and inverse ETFs. The regulators warned that while leveraged and inverse ETFs may be useful for certain sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis.
FINRA and the SEC further warned that due to the effects of compounding, the performance of leveraged and inverse ETFs over longer periods of time can differ significantly from their stated daily objective, noting that leveraged and inverse ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.
Oppenheimer instituted policies following this regulatory guidance prohibiting its representatives from soliciting retail customers to purchase non-traditional ETFs, and also prohibited them from executing unsolicited non-traditional ETF purchases for retail customers unless the customers met certain criteria, e.g., the customer had liquid assets in excess of $500,000.
Oppenheimer, however, failed to reasonably enforce these policies; thus, representatives continued to solicit retail customers to purchase non-traditional ETFs and continued to execute unsolicited non-traditional ETF transactions even though the customers did not meet Oppenheimer’s stated criteria. From August 2009 through September 30, 2013, more than 760 Oppenheimer representatives executed more than 30,000 non-traditional ETF transactions totaling approximately $1.7 billion for customers.
Fellows Hymowitz Rice, Safirstein Metcalf LLP and The Galbraith Law Firm LLC represent investors (both retail and institutional) who have suffered financial losses as a result of misconduct.
If you invested in a leveraged or inverse ETF (between 2008-2016) offered by Oppenheimer or another broker-dealer and want to know more about your rights, please contact Fellows Hymowitz Rice at 1-800-660-HURT (4878) or Safirstein Metcalf at 1-800-221-0015.
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