FINRA Expels Stockbroker Over Leveraged ETFs Sales

Former Morgan Keegan stockbroker Michael Venable of Tyler, Texas has been barred permanently from the securities industry for recommending and selling risky, leveraged exchange traded funds ("ETFs") to clients with conservative investment objectives and risk profiles.

FINRA determined that Venable put his clients at great risk by selling them leveraged Direxion ETFs. Venable also used margin borrowing in some of his clients' accounts to purchase the risky products. Using margin to purchase the ETFs exacerbated the already high risk associated with the speculative investments. Venables' clients at issue ranged in age from 40 to 91, with incomes from $25,000 to $50,000. Leveraged ETFs generally are considered to be unsuitable for conservative investors with limited incomes.

Leveraged ETFs are risky and highly volatile. Although the products are designed for short-term trading, many brokers do not understand the investments and recommend leveraged ETFs as long-term, buy-and-hold investments.

We expect the trend of brokers improperly recommending these risky ETFs to continue unless and until brokerage firms properly educate their brokers and adequately monitor their brokers' recommendations of the investments.

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