Steven M. Rini, of Westlake, Ohio, a stockbroker associated with Morgan Stanley is the subject of a customer initiated investment related complaint or arbitration proceeding seeking $234,000 in damages based upon allegations that he made material misrepresentations and omissions of material fact in connection with the sale of certain exchange traded funds. FINRA Public Disclosure shows no other complaints or regulatory proceedings in the last 25 years Mr. Rini has been registered.
Depending on the type of fund, Exchange Traded Funds can be risky. Unlike a traditional Standard and Poors Index fund, which would be expected to track an S&P index, inverse and/or leveraged ETF funds, also known as “non-traditional ETFs” are designed to accomplish the opposite or inverse. So for example, if the value of an index, the overall market or any particular index of securities within an market industry or subgroup goes down, the value of inverse ETF, or sometimes called a “bear” or “short” ETF, would be expected to go up.
Also a leveraged ETF fund is designed move multiples of the market. So for example, a leveraged ETFs may be 2X or 3X, meaning that if the market or index goes up 1%, these securities could be expected to go up by 2% or 3%, or double or triple the movement of the underlying index.
However, both securities are leveraged to achieve these results, and are associated with higher transactions costs as opposed to ETFs which merely track the market. Moreover, because particularly inverse ETF funds reset after each trading period, based upon market conditions.
These securities are not suitable to be owned as longer term investments or for more than a few trading sessions, particularly in volatile markets. Accordingly, as a general matter, these securities are not for hedgers but are most appropriate for speculators.
The Guiliano Law Group, P.C.
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