Ace Diversified Capital Settles with FINRA Over Sales of Inverse and Leveraged ETFs

Have you lost money investing in ETFs with Ace Diversified Capital in California?  We are currently investigating allegations made against Ace Diversified Capital, Inc., a San Gabriel, California-based securities brokerage firm.  FINRA (the Financial Industry Regulatory Authority) brought a regulatory action against Ace Diversified Capital, making allegations that it failed to adequately supervise the sales of non-traditional ETFs, including inverse ETFs or leveraged ETFs, from July 2013 to August 2015.

To settle these allegations, Ace Diversified Capital (CRD # 41768) agreed to pay a $20,000 fine and pay restitution of $9,442.

ETFs (or Exchange Traded Funds) have become increasingly popular over the last 20 years.  ETFs are typically used to track and replicate the performance of an index, such as the S&P 500, the Russell 2000, or the Dow Jones.  ETFs are popular, because investors can invest in a basket of securities that provides diversification but with the simplicity of being a single stock.

Many companies have also created leveraged or inverse ETFs.  Leveraged ETFs try to replicate the performance of a particular index, but attempt to replicate the performance by doubling or even tripling the index.  As an example, the Proshares Ultra Russell 2000 ETF seeks to double the performance of the Russell 2000 Index.

Inverse ETFs also try to replicate the opposite (or even multiple opposites) of a particular index.  For example, Ultrashort QQQ Shares seeks a return of two times the inverse (-2x) of the daily performance of the NASDAQ-100 Index. Leveraged and inverse ETFs can be useful investment tools for investors seeking intra-day trading.

However, inverse and leveraged ETFs are often misused, by retail investors and even financial advisors.  The regulators and others have long-warned the securities industry about the dangers of inverse and leveraged ETFs.  These are designed to be day-trading vehicles, but often financial advisors recommend holding these ETFs in an investor’s accounts for weeks or even months.

Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado; and Seattle, Washington.  We represent investors in FINRA arbitration proceedings in all 50 states, including investors in California.  Our attorneys have represented over one thousand investors against many brokerage firms in the past.

Click to view:  Ace Diversified Capital FINRA AWC

If your advisor recommended investments in ETFs that caused you losses, through Ace Diversified Capital, please CONTACT US at 720-599-3505 for a free case evaluation.