An investment adviser must pay a total of $1.8 million to a group of investors in a securities arbitration ruling that lawyers say is among the first to involve losses tied to leveraged and inverse exchange-traded funds.
Nicholas Rowe and his firm, Focus Capital Wealth Management Inc of Bedford, New Hampshire, were found liable in a case alleging negligence, civil fraud, and other misdeeds, involving the sale of risky ETFs to nine investors, according to a ruling by a Financial Industry Regulatory Authority arbitration panel. Some of the investors were in their fifties and sixties, including two widows.
Leveraged and inverse ETFs are designed to amplify short-term returns by using debt and derivatives and are considered more suitable for professional traders than for long-term retail investors or anyone who cannot tolerate a high-risk portfolio. Only a handful of cases involving the securities are pending, say arbitration lawyers. But that figure is likely to grow, say lawyers, as
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