Morgan Stanley Smith Barney became the latest firm to place restrictions on the sale of leveraged, inverse and leveraged inverse exchange-traded funds.

Last Friday, the firm stopped permitting solicited purchases of these three types of ETFs in traditional brokerage accounts. In a statement, MSSB said: “Unsolicited purchases in these accounts will be permitted only subject to enhanced oversight and review. In addition, no purchases of these securities will be permitted in advisory accounts managed by Morgan Stanley Smith Barney financial advisers.”

The firm added that advisrrs have been encouraged to review existing positions in these securities with clients and discuss the “unique characteristics and risks” of these products.

Several other brokerage firms, including Ameriprise, Edward Jones, LPL Financial, and UBS have either banned or temporarily stopped the sale of leveraged ETFs after a warning was issued in June by the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization, which oversees brokerage firms and brokers.  Two months ago, FINRA said that inverse and leveraged ETFs “typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

In addition, at least one class-action lawsuit was recently filed against ProShares, regarding one of its inverse leveraged exchange-traded funds. The suit, filed in the U.S. District Court for the Southern District of New York, claims that the ProShares UltraShort Real Estate fund did not disclose a series of risks, including a “spectacular tracking error.”   The fund, like other leveraged ETFs, seeks to deliver juiced up returns against a benchmark. In the case of this fund, it seeks to deliver twice the opposite of the daily performance of the Dow Jones U.S. Real Estate Index. But, last year, the index fell 39%, while the fund fell a whopping 48%.

ProShare Advisors released a statement to The Wall Street Journal saying: “The allegations reported in the complaint are wholly without merit. We plan to defend against this suit vigorously.”

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