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Investigation: Infinex Investments, Inc.’s Sale of ETFs

The investment and securities fraud law firm Fitapelli Kurta is continuing to investigate Infinex Investments, Inc. regarding its sale of inverse and inverse-leveraged Exchange-Traded Funds (ETFs).  Infinex is a full-service brokerage firm and has been a member of FINRA since 1994.  Infinex employs approximately 400 stockbrokers, many of which work out of bank branches.

Earlier this year, FINRA fined  Infinex $75,000 for permitting a number of its stockbrokers who received minimal training regarding ETFs to sell the product.  FINRA also alleged that these Infinex brokers failed to perform reasonable diligence to understand the risks associated with these highly complicated and risky products, and therefore, made unsuitable recommendations to its customers to purchase ETFs when they didn’t understand the product.  NASD Conduct Rule 2301(a) requires stockbrokers to perform reasonable due diligence to understand the nature of the securities they recommend, as well as the potential risks and rewards.

FINRA materials have warned brokers about the risks associated with ETFs.  ETFs are typically registered unit investment trusts or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index.  Shares of ETFs are usually listed on national security exchanges and trade throughout the day at prices established by the market.

Inverse and inverse-leveraged in particular ETFs are highly complex and sophisticated securities products that can lead to substantial losses in customer accounts because they “reset” daily.  For example, when a leveraged ETF opens for trading each morning, it resets to the index level.  For this reason, leveraged ETS are only intended for short-term daily trading.  Despite the fact that these securities are typically meant for daily trading because they reset at the end of each trading day, many of the positions recommended by Infinex brokers were held in customer accounts for more than seven days.   By holdings the ETFs for multiple trading sessions, the Infinex brokers exposed their client accounts to significant risk and potential losses.

If you or someone you know has invested with Infinex Investments, Inc. in ETFs or any other speculative security and has lost money as a result of their investment, please contact the lawyers at Fitapelli Kurta today.  We represent customers nationwide in arbitration lawsuits against brokerage firms such as Infinex and do not charge for consultations.  Call us today.

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