Exchange Traded Funds (ETFs)

Seasoned Stock Fraud Attorneys Asserting the Rights of Investors Nationwide

Exchange traded funds, or ETFs, have become a popular way for investors to diversify their holdings. They contain a portfolio of shares that track market indexes like the Dow Jones or the S&P 500, or they may instead follow only a particular segment of the market. For instance, an ETF might contain shares of energy or pharmaceutical companies. If one of those particular indexes is performing well, the corresponding exchange traded fund will mirror that trend. It will also parallel a downward trend, unfortunately, and significant losses may result for people who have invested in it. Sometimes nobody is at fault when this happens, but other times dubious actions by a broker are to blame. The accomplished stock fraud lawyers at the New York based firm of Fitapelli Kurta know how to resolve a wide variety of investor claims, including those related to exchange traded funds. Well-versed in both state and federal securities laws, our securities attorneys practice frequently before the FINRA, an independent enforcement agency for this complex industry.

Benefits and Risks of Exchange Traded Funds

These funds have the capability of providing diversification for a portfolio at realistic costs, especially for smaller investors. Trade in ETFs resembles a stock exchange, where shares are bought and sold on the market throughout the day. As with stocks, they can be held for the long term, sold short, or bought on margin.

Traditionally, ETFs have carried low fees, which is advantageous for investors. This stems from the fact that they are passively managed, in contrast to other options like mutual funds. The purpose of ETFs is to simply remain in line with the index to which they are attached. As a result, managers are not actively monitoring and adjusting assets but merely making minor changes to a portfolio from time to time.

Recently, exchange traded fund managers have begun to develop more and more innovative variations of this form. One example is leveraged ETFs, which use debt and financial derivatives. Like many other securities that use leverage, profits may increase, but losses can also rise. Since these types of ETFs can be relatively dangerous for traditional investors, a broker or financial advisor must follow industry guidelines to inform clients of the potential for risk. Exchange traded funds are also becoming increasingly focused in particular areas, whether it is a commodity, a certain geographic region, or a particular asset class.

File a Claim Against a Broker Whose Misrepresentations Harmed You

While ETFs have become a preferred way of investing for many individuals, they may not be suitable for every person’s portfolio. A qualified broker should identify a client’s goals and strategy to determine whether they are a good fit.

As with any investment, a broker must always inform clients about any conflicts of interest, the suitability of an ETF to the client’s overall investment strategy, and all pertinent information about the transaction. Some factors that determine whether this fund may be an appropriate option include an individual’s current holdings, his or her financial situation, and his or her investment needs. A broker who is complying with the duties required by this industry will discuss the variety of ETFs available and recommend a fund that tracks an index in line with the investor’s general plan.

Since ETFs are securities that are traded, it is important to know that a broker makes a commission every time an investor buys or sells shares. Another significant factor to consider is that selling shares of this fund can trigger taxable gains, just as with other securities. There are obvious incentives in this situation for an unscrupulous broker to act in a way that is contrary to a client’s interests. If this happens, seeking legal advice is a wise step to take.

New York Lawyers Knowledgeable in Investment and Securities Fraud Claims

If you suspect your broker did not adequately inform you of the risks or fees associated with your ETF investment, you should contact a knowledgeable legal professional as soon as possible. The securities fraud attorneys at Fitapelli Kurta have the dedication and resources to examine your case and guide you toward a favorable outcome. From our office in New York, we fight for the rights of investors throughout the United States who have experienced losses due to broker negligence or fraud. Call (877) 238-4175 or contact us online for a free initial consultation.