UBS AG (UBS) is reportedly closing down two of its exchange traded note (ETN) funds that were concentrated in master limited partnerships:
· The $11M ETRACS 2x Monthly Leveraged S&P MLP Index ETN (MLPV), which was just issued last July
· The $113M ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL)
The move comes following the collapse of the MLPV, which is down to just $6.6/share and the MLPL, which is now at $12.60/share.
With the MLPL and MLPV, their notes weren’t due to expire until after 2040. UBS, in its press release, noted that an “Acceleration Event” occurred, which was sparked by intraday indicative value hitting $5.00 or less on 1/20/16. It was oil’s sharp price decline that activated the acceleration event.
It appears that investors may not have known that such an event could compel the funds to instantly liquidate holdings at prices that could wipe out shareholder value. Some of their advisers may not have been aware of the ETNs mandatory liquidity provisions or that they were exposed to volatile commodities, including oil, to such a degree. For example, master limited partnership investments are heavily connected to natural and energy resource companies that are very dependent on oil prices staying high.
If your financial adviser recommended that you invest in either the ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN or the ETRACS 2x Monthly Leveraged S&P MLP Index please contact our securities fraud law firm right away. Shepherd Smith Edwards and Kantas, LTD LLP is looking into possible securities claims against broker-dealers and investment advisers who recommended that investors back these securities.
It is important that advisers and brokers make sure that investing in gas and oil and commodities-related investments is suitable for an investor, his/her risk tolerance, and investment goals. Also, financial representatives have a responsibility to understand the risks involved and properly communicate these to clients so that the latter understand what they are getting involved in.
If you are an investor who backed one or both of these UBS MLP ETNs, please contact our securities law firm right away. Shepherd Smith Edwards and Kantas, LTD LLP is also investigating claims involving investors whose brokers or investment advisers recommended that they invest in structured notes, leveraged ETFs, exchange traded notes, private placements, individual stocks, mutual funds, and other oil and gas commodities products.
UBS Shuts Two MLP ETNs After Steep Declines, Barron’s, January 20, 2016
UBS ETRACS Launches 2X Leveraged S&P MLP Index ETN Offering Significant Income Potential, Yahoo, July 15, 2015