Erez Law is currently investigating brokers across the country who recommended their clients invest in UBS ETRACS exchange-traded notes (ETNs). It is alleged that UBS Financial Services, Inc. and TD Ameritrade brokers recommended their clients invest in UBS ETRACS ETNs, despite that these investments are not suitable for many investors.
UBS ETRACS ETNs are unsubordinated debt securities that are senior and unsecured and traded on the NYSE Arca. They are designed to track the total return of a specific market index and they make leveraged bets on volatile market sectors. These complex investments were inherently risky as they employed leverage and were invested in risky sectors. Investors are also not guaranteed to receive any coupons or payments on these investments.
UBS ETRACS ETNs were allegedly marketed and sold to UBS Financial Services, Inc. and TD Ameritrade clients who were seeking income and capital preservation. Such conservative investors include the elderly and retired individuals looking for a stable source of income and to sustain themselves on their investments and without any way to earn additional income if their investments were lost.
Unfortunately, brokers may not have explained to these conservative investors the potential risks to their investments and now these investors have now suffered significant investment losses.
UBS ETRACS ETNs have suffered significant declines when the market crashed due to the COVID-19 pandemic (the coronavirus of the winter and spring of 2020).
On March 20, 2020, UBS announced that it will redeem all of the outstanding securities, including:
- ProShares Daily 3x Long Crude ETN linked to the Bloomberg WTI Crude Oil Subindex ER (WTIU)
- VelocitySharesTM 1X Long VSTOXX Futures ETN (EVIX)
- VelocitySharesTM 1X Daily Inverse VSTOXX Futures ETN (EXIV)
Many investments have seen losses of 60% or more. UBS also announced that the following ETNs are to undergo mandatory redemptions and has frozen trading of other ETRACS. UBS ETRACS ETNs include:
- 2x Leveraged Closed-End Fund (CEFL)
- 2x Leveraged Closed-End Fund (CEFZ) – suspended
- 2x Leveraged Diversified High Income (DVHL) – suspended
- 2x Leveraged Dow Jones Select Dividend Index (DVYL)
- 2x Leveraged ISE Exclusively Homebuilders (HOML)
- 2x Leveraged Long Wells Fargo Business Development Company (LBDC) – suspended
- 2x Leveraged Long Wells Fargo Business Development Company Index (BDCL) – suspended
- 2x Leveraged Long Wells Fargo Business Development Company Index (BDCY)
- 2x Leveraged Mortgage REIT (MORL)
- 2x Leveraged Mortgage REIT (MRRL)
- 2x Leveraged MSCI US REIT Index (LRET) – suspended
- 2x Leveraged S&P Dividend (SDYL)
- 2x Leveraged U.S. High Dividend Low Volatility (HDLB)
- 2x Leveraged US Small Cap High Dividend (SMHB)
- 2x Leveraged US Small Cap High Dividend (SMHD)
- 2x Leveraged Wells Fargo MLP Ex-Energy (LMLB)
- 2x Monthly Leveraged Alerian MLP Infrastructure Index (MLPQ)
- 2x Monthly Leveraged S&P MLP Index (MLPZ) – suspended
- 2x Monthly Leveraged Wells Fargo MLP Ex-Energy ETN (LMLP) – suspended
- 3x Inverse Crude ETN linked to the Bloomberg WTI Crude Oil Subindex (WTID) – suspended
Brokers at brokerage firms across the country did not disclose the significant risks involved with investments in UBS ETRACS ETNs.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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