Firm Will Pay to Settle Charges Related to Inverse ETF Case
Morgan Stanley has agreed to pay $8 million in penalties and admit wrongdoing to settle charges brought by the U.S. Securities & Exchange Commission (SEC) related to single inverse ETF (exchange-traded fund) investments that Morgan Stanley recommended to customers.
According to the SEC, Morgan Stanley failed to properly implement its policies and procedures to ensure that clients knew the risks involved with purchasing inverse ETFs. Generally speaking, inverse ETFs are not suitable for investors planning to hold on to them for longer than one trading session unless it is part of a hedging or trading strategy. Many brokers do not properly understand this feature of inverse ETFs and, therefore, they do not properly inform customers about the true nature of the ETFs.
The firm apparently failed to obtain disclosure notices from several hundred customers, and Morgan Stanley was accused of soliciting clients to purchase inverse ETFs in retirement and other accounts that typically are used to hold long-term investments. Many of those who purchased inverse ETFs lost money.
The SEC also found that Morgan Stanley failed to comply with its policy requiring supervisors to evaluate the suitability of inverse ETFs for each customer. The SEC also claimed that Morgan Stanley failed to monitor the inverse ETF positions regularly and did not ensure that certain brokers completed inverse ETF training.
Did you invest in an Inverse ETF?
If you invested in a single inverse ETF and suffered a loss, you may have certain legal rights that require your immediate attention.
The attorneys at Dimond Kaplan & Rothstein, P.A. are well versed in inverse ETF exchanges and securities proceedings. The firm has recovered over $100 million from banks and brokerage firms for their wrongful actions.
Call a Securities Attorney Today
Contact us to schedule an appointment or consultation today to discuss your rights and options.
