Leveraged ETFs have recently returned to the news as Direxion announced the release of two new funds. As reported on Marketwatch.com, one of these new funds seeks to obtain returns equal to 300% of the two-year Treasury yield, while the other fund seeks to obtain returns equal to 300% of the inverse return of the two-year Treasury yield (in other words, when the Treasury yield declines, the investor profits).
Despite the repeated warnings issued by FINRA and the SEC as to …

FINRA recently reported its October 2009 arbitration statistics. As of October 31, 2009, 6,113 claims were filed, compared to only 3,971 as of October 31, 2008, an increase of 54%. FINRA also reported that 3,697 cases were closed through October and that the average turnaround time for cases that go to an arbitration hearing has declined by 9% (14.3 months from 15.8 months).
The most frequent securities and investment claims/controversies involved in arbitration continue to be breach of fiduciary duty, misrepresentation/fraud, …

ProFunds Group, one of the largest issuers of leveraged and inverse ETFs recently issued a warning that some of its leveraged and inverse ETFs may not be suitable for all investors. In the prospectus dated October 1, 2009, the company repeatedly states:
The Fund is different from most exchangetraded funds in that it seeks leveraged returns and only on a daily basis. The Fund also is riskier than similarly benchmarked exchange-traded funds that do not use leverage. Accordingly, the Fund may …

On October 1, 2009, Colorado Securities Commissioner Fred Joseph announced that the Securities Division had filed a complaint against Stifel, Nicolaus & Company. According to the Division’s news release, the complaint alleges:
Stifel Nicolaus falsely represented auction rate securities as liquid, short-term investments to Colorado investors without discussing the risks. These representations gave investors a false sense of security that the investments would always be liquid when auction rate securities, in fact, faced significant, inherent liquidity risks.
A copy of the Notice …

From Investment Fraud Blawg and Securities Fraud Blawg:
“A nation that forgets its past is doomed to repeat it.” — Winston Churchill
On Wednesday, September 23, 2009, several major media outlets published articles discussing the Obama administration’s continued efforts to enact enhanced regulatory reform over the financial markets.
Given what has occurred over the past two years, enhanced regulation is absolutely necessary. As Paul Krugman noted in a New York Times Op-Ed article: “In the grim period that followed Lehman [Brothers'] failure, it …

From Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg:
On September 21, 2009, Missouri Secretary of State Robin Carnahan announced that her office had finalized a consent order with JP Morgan Chase & Co. related to the firm’s marketing and sale of auction rate securities (ARS) to Missouri investors.
According to the press release, Missouri investors will receive more than $28 million. In addition, JP Morgan will pay $86,000 to the Missouri Investor Education and Protection Fund, which is used …

From Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg:
Earlier this week, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) issued a joint warning cautioning investors on the dangers in investing in leveraged ETFs and inverse ETFs. The two regulators issued the warning because they “believe individual investors may be confused about the performance objectives of leveraged and inverse exchange-traded funds (ETFs).”
The warning also notes that leveraged ETFs are designed to achieve their investment performance …

From Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg:
Yesterday, August 17, 2009, the Attorney General of the state of New York announced that it had filed a lawsuit against Charles Schwab & Co. for its sales of auction rate securities. According to the press release, the Complaint charges Schwab with violations of the Martin Act for:
falsely representing auction rate securities as liquid, short-term investments without discussing the risks. These representations gave investors a false sense of security that …

From Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg:
According to a recent article on InvestmentNews.com, a study commissioned by Charles Schwab revealed that a significant percentage of investors are unaware of the losses sustained in their accounts. To make matters worse, more than one-third of the investors surveyed did not know which mutual funds they owned and less than one-third spoke with their financial advisor or stockbroker on a regular basis.
In the article, a Charles Schwab executive was …

From Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg:
The September 2009 edition of The Atlantic contains a story written by William D. Cohan, which outlines the Final Days of Merrill Lynch. Mr. Cohan is also the author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street (available at Amazon.com).
This article is an worthwhile (and brief) read for anyone interested in the collapse of Merrill Lynch or Wall Street in general.
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