We are a firm that specializes in investor loss recovery. Investors of Inverse VIX Exchange Traded Notes (ETNs) and Inverse VIX Exchange Traded Funds (ETFs), including VelocityShares Daily Inverse VIX Short-Terms ETN (XIV) and the ProShares Short VIX Short-Term Futures ETF (SVXY), may have grounds for the recovery of their losses.
If you were sold an Inverse VIX ETN please call 1-866-817-0201 for a free and confidential consultation with an attorney.
These investments were suitable for very few investors. The sale of unsuitable investments is a form of negligence and possibly fraud. These investments carry such a high level of risk and are so complicated that they were likely not suitable for any retail (non-institutional) investor. “Unless you were a hedge fund manager you should not have been sold these funds.” If you were recommended such investments as part of a retirement savings portfolio you have grounds to recover your losses. The makers of these funds have acknowledged that the fund was for hedge fund managers only, and not individual investors.
Starting on February 2 and continuing through February 6, investors saw portfolios implode due to investments in obscure products that tracked market volatility. Such investments tracked the VIX index. The VIX index is a complicated monitor of investment market volatility or “investor fear.” An “inverse VIX” investment is an investment that benefits from stable markets but loses value quickly in times of volatility. The losses in the inverse VIX investments mounted quickly until NASDAQ halted the trading of these investments on February 6, with some suffering losses of almost all value in just a few days.
For example, VelocityShares XIV plummeted 80 percent in extended trading on February 5, 2018. This is a security issued by Credit Suisse this tracks the inverse of the VIX index tracking market volatility. As the market rose and sank the value of XIV dropped sharply. Such sudden drops have a cascading impact that can lead to margin calls and other losses.
The dramatic losses was foreseeable to securities brokerages, often referred to as securities “broker-dealers.” The regulator that oversees broker-dealers, FINRA, the Financial Industry Regulatory Authority, issued its latest warning in a string of warnings on October 2017 to broker-dealers about VIX and inverse VIX investments. FINRA identified such investments speculative and warned the “major losses” could result from such investments from a failure to understand how such investments work. For example, many are short-term trading vehicles that can degrade over time.
FINRA also warned all financial advisers that VIX ETNs may be unsuitable for non-institutional investors and any investor looking to hold investment as opposed to actively trading the investment. While this warning occurred in October 2017, similar warnings were issued in 2012. That same month, FINRA fined Wells Fargo for unsuitable recommendations of similar volatility funds.
FINRA stated in 2012 in a Regulatory Notice, RN 12-03, that heightened supervision is required of any broker who sells such complex investments, and specifically identified the need for brokerage firms to oversee any recommendation of an investment based upon the VIX.
While all short VIX trading is suspect and potentially recoverable, the following investments are of particular concern: XIV, SVXY, VMIN, EXIV, IVOP, XXV, and ZIV.
Investors suffering losses in such investments despite the warnings. This is a form of negligence and in some situations fraud.
PedersonLaw has represented investors in similar actions in most of the 50 states either directly or pro hac vice.