Securities Fraud and Mismanagement

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SVXY, Inverse VIX ETN Losses

We are a law firm that specializes in assisting investors in loss recovery.  Investors may have grounds to recover losses in inverse VIX investments.  This includes investors recommended inverse VIX Exchange Traded Notes (ETNs) and inverse VIX Exchange Traded Funds (ETFs), including VelocityShares Daily 2x VIX (TVIX), VelocityShares Daily Inverse VIX Short-Terms ETN (XIV) and the ProShares Short VIX Short-Term Futures ETF (SVXY).

If you were sold an inverse VIX ETN or ETF please call 303-300-5022 for a free and confidential consultation with an attorney to discuss your rights and potential for loss recovery.

These inverse VIX investments were suitable for only a 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 the investments 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.”

NYSE pic 2On February 2 and continuing through February 6, 2018, investors saw portfolios drastically drop due to inverse VIX investments.  VIX funds are obscure products that tracked market volatility known as the  “VIX index.”  The VIX index is a complicated monitor of investment market volatility or “investor fear.”  While VIX investments would rise during periods of volatility, inverse VIX funds would do the opposite and drop sharply in periods of market volatility.  Such losses were suffered by inverse VIX investors.  These losses continued until NASDAQ halted the trading of these investments, some suffering substantial losses in just a few days, on February 6, 2018.

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.  Such sudden drops have a cascading impact that can lead to margin calls and other losses.

Wall Street photo 2The regulator that oversees securities brokerages, FINRA, the Financial Industry Regulatory Authority, issue its latest warning in a series of similar warnings on October 2017 to securities brokers about VIX investments.  FINRA identified such investments as 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 relatively quickly.

That same month, FINRA fined Wells Fargo for unsuitable recommendations of similar volatility funds.

FINRA warned all US broker dealers of the need to oversee the recommendation of VIX-based investments in early 2012.  In Regulatory Notice 12-03, FINRA gives the type of complex investments that require heightened supervision.  The Notice states, “For example, some exchange-traded products offer retail investors exposure to stock market volatility. Some of these products also provide inverse or leveraged exposure. The investable form of volatility may be in the form of futures on the CBOE Volatility Index (VIX) that reflect the market’s expectation of volatility.”

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 by FINRA previously.

While all inverse VIX recommendations are suspect and the losses potentially recoverable, the following investments are of particular concern:  LJMIX, UVXY, VXX, TVIX, XIV, SVXY, VMIN, EXIV, IVOP, XXV, and ZIV.

PedersonLaw has represented investors in similar actions in most of the 50 states either directly or pro hac vice.  This includes Arizona, California, Colorado, Montana, Missouri, New Mexico, Nevada, Oregon, Texas, Utah, and Washington.