After Finra warning, firms back away from leveraged ETFs

At least three brokerage firms have decided not to sell leveraged exchange traded funds a month after the Financial Industry Regulatory Authority Inc. warned brokers that they “typically are unsuitable for retail investors” who hold them longer than a day.
JUL 24, 2009
By  Bloomberg
At least three brokerage firms have decided not to sell leveraged exchange traded funds a month after the Financial Industry Regulatory Authority Inc. warned brokers that they “typically are unsuitable for retail investors” who hold them longer than a day. The New York- and Washington-based regulator clarified its position on such ETFs in a podcast July 13, saying Finra member firms could recommend that a retail investor hold such ETFs for longer than one day provided that a suitability assessment is conducted with respect to the investor and the ETF. But that didn't stop Edward D. Jones & Co. LP of St. Louis, Ameriprise Financial Inc. of Minneapolis, and LPL Investment Holdings Inc. of Boston, from banning the sale of such ETFs within the last few weeks. In LPL's case, the company decided to prohibit the sale of leveraged ETFs that seek more than two times the long or short performance of the target index, said spokesman Joseph Kuo. Direxion Funds of Newton, Mass., one of the major players in the leveraged ETF and mutual fund arena, is reaching out to the brokerage firms to argue that the funds can be used successfully, said Andy O'Rourke, the firm's marketing director. Special attention, however, is being paid LPL because Direxion believes that firm's registered representatives are best suited to use its ETFs, he said. “We're talking about what the rationale is behind their decision, and if there is anything we can do to get them to open up [access to leveraged ETFs] to a limited audience,” Mr. O'Rourke said.

Latest News

Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034
Social Security trustees see one less year in insolvency countdown, project shortfall to start 2034

New report shows dimmed outlook for benefits to retirees and disabled Americans, creating further pressure for federal tax hikes or more borrowing.

NY Republican Stefanik presses SEC to probe Harvard bond sale
NY Republican Stefanik presses SEC to probe Harvard bond sale

Open letter to SEC Chair Paul Atkins questions whether the Ivy League university withheld material information prior to its $750 million taxable bond offering.

Ex-LPL leader re-emerges at The Wealth Consulting Group
Ex-LPL leader re-emerges at The Wealth Consulting Group

The Las Vegas-based hybrid RIA overseeing $8.8 billion in assets has named Andy Kalbaugh president to help scale its advisor platform.

Envestnet extends investment offerings with new alts model portfolios
Envestnet extends investment offerings with new alts model portfolios

The wealth tech giant – in collaboration with Fidelity, BlackRock, State Street, and Franklin Templeton – is offering its advisor and wealth firm users more ways to diversify.

Just as wealth industry M&A was picking up, economic uncertainty could kill it again
Just as wealth industry M&A was picking up, economic uncertainty could kill it again

Deal volume increased post-election but now caution has taken over.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave