The Financial Industry Regulatory Authority is asking brokers and registered investment advisers to provide it with information on the sale of leveraged and inverse exchange-traded funds between Oct. 1, 2008 and March 30 to investors who held them for 10 business days or longer. The authority is looking for all sales and marketing materials, customer communications and complaints, arbitration claims and written supervisory procedures regarding the sale of such funds.
In a notice on its website, FINRA reminded the brokers and advisers that these instruments are complex and that they are generally not suitable for retail investors who hold them for longer than one trading session.
Michael Sapir, chairman of ProFunds Group, told The Wall Street Journal that he disagreed that leveraged ETFs are more complicated than many other mutual funds in the marketplace and that they can be held for longer than one day.
He said his firm is working with FINRA to be sure that they have a complete picture and that they have full information.
But Scott Burns, director of ETF analysis at Morningstar, applauded the FINRA investigation, saying, This is a huge step forward toward protecting individual investors from having exposure to these products unwittinglyinserted into their portfolios.