NH Investment Adviser to Pay $1.8M to Investors in FINRA Securities Arbitration Case Over Leveraged and Inverse Exchange-Traded Funds

A Financial Industry Regulatory Authority panel has ruled that Focus Capital Wealth Management Inc. and its owner Nicholas Rowe must pay investors $1.8 million over securities fraud allegations related to the sale of high-risk exchange-traded funds. The investment adviser is accused of civil fraud, negligence, and other misdeeds related to the funds’ sale to nine clients, some of them older investors.

The claimants’ investments had been heavily concentrated in inverse and leveraged ETFs. They contend that Rowe upped their risk by purchasing and holding the ETFs for up to a few months-a strategy that some consider practically guaranteed there would be loss. Focus and Rowe have been named in civil proceedings initiated by the New Hampshire Bureau of Securities Regulation. Meantime, a state court has put out a temporary order barring Rowe and his firm from conducting business.

Exchange-Traded Funds
Inverse and leveraged ETFs are supposed to amplify short-term returns through the use of derivatives and debt. They are more appropriate for traders that are professionals than long-term retail investors or any party that cannot properly weather a risky portfolio. According to some ETF fraud lawyers, many investors don’t comprehend the degree of risk involved.

Leveraged and inverse ETFs comprise $27 billion of the $1.29 trillion ETF market in the US. A few years ago, regulators started putting out warnings about selling these particular ETFs over concerns that brokers were using them to buy-and-old investors.

If you believe that you were the victim of ETF fraud, contact our investment fraud law firm today.

N. Hampshire investment adviser must pay $1.8 mln in ETF case, Reuters, December 3, 2012
Exchange-Traded Fund, Investopedia

More Blog Posts:
Morgan Stanley, Citigroup, Wells Fargo, and UBS to Pay $9.1M Over Leveraged and Inverse ETFs, Stockbroker Fraud Blog, May 3, 2012

Goldman Sachs to Pay $22M For Alleged Lack of Proper Internal Controls That Allowed Analysts to Attend Trading Huddles and Tip Favored Clients, Institutional Investor Securities Blog, April 12, 2012

Ex-Goldman Sachs Director Rajat Gupta Pleads Not Guilty to Insider Trading Charges, Stockbroker Fraud Blog, October 26, 2011