Securities Fraud and Mismanagement

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Did the actions/inactions of my broker fall below the required standard of care?

We’ll tell you, for FREE.

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 the ProShares Short VIX Short-Term Futures ETF (SVXY), Volatility Shares -1 Short VIX Futures ETF (SVIX) or Simplify Volatility Premium ETF (SVOL) may have grounds for the recovery of their losses.

If your advisor recommended SVXY, SVIX, SVOL, or any other inverse VIX ETN please call 1-844-5858 for a free and confidential consultation with an attorney.

In some states, regulators prohibit advisors from selling these investments to retail investors.  In other states, the sale of these leveraged ETFs is just extremely negligent.

History repeats itself with these investments.  As such, there is little excuse on the part of an advisor in not knowing how quick these investments can deteriorate to a small percentage of the original investment.  Such meltdowns occurred in 2018 and 2020.  The issue happened again in 2025.

The first thing to understand is that many of these investments are “geared.”  That means they are leveraged 1.5x, 2x and 3x and inversely -1x, -2x and -3x against a certain index.  Most commonly, the investments are leveraged against the VIX.  Such investments are designed to not be held for more than a single trading day.  Recommending otherwise is often actionable.

These investments are also suitable for very few investors.   The sale of unsuitable investments by a securities broker 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 hedge fund managers are the only investors suitable for the fund., and not individual investors.

Investment advisory firms also sold these investments, and in many cases sold the investments inappropriately.  These include SRS Capital, IFAM, Movants Capital Management, Tradition Capital Management, and Investment Advisor Group.

Starting on February 2 and continuing through February 6, 2018 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 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.

Of particular concern, though any sale of such an investment to a retail investor is concerning, are investors who purchased such shares through the following brokerage firms:  Credit Suisse, Fidelity, Merrill Lynch, and Wells Fargo.

Securities firms foresaw the dramatic losses.  These firms are 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 investingstockphoto 1funds.

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:  SVXY, SVIX, and SVOL.

FINRA is conducting sweep investigations of all brokerages that sold any and all of these investments to retail investors.  ‘The sweep is part of Finra’s continuing focus on the suitability of sales of complex products, including leveraged and volatile products, to retail customers,’ stated FINRA.

Leveraged investing is almost always high-risk.  Leveraged ETFs are just another way of losing a lot of money quickly.

In addition to suitability, there is also concern that due diligence by these brokerages should have revealed that the index was subject to manipulation.  The Financial Times of London recently reported on the issue.  A scholarly report from researchers at the University of Texas in 2017 identified that individuals manipulate market volatility and the mechanism for manipulating the VIX.

Investors suffering losses in such investments may have valid claims despite the warnings contained in the prospectus.  These investments should not have been offered to any retail investors.  As such, the prospectus defense is usually meaningless.

PedersonLaw represents investors in similar actions and has represented investors in most of the 50 states either directly or pro hac vice.