According to the Wall Street Journal, the SEC is looking into VelocityShares 2x long VIX Short Term Exchange traded note (NASDAQ:TVIX), managed by Credit Suisse Group AG.
TVIX had about $700 million in assets before its recent decline in which it lost 60% of its value during the last week of March.
Share price for TVIX over the past year has ranged from a high of $109 to a low of $5.85. TVIX is a complex exchange-traded note (NYSE:ETN) that is designed to track stock market volatility, however its dramatic decline last week, during a period when market volatility was little changed has regulators and investors concerned and curious as to the reason for the price drop.
While hedge funds are generally the most active traders of exchange traded notes (ETNs), they have become more popular with smaller investors due to the fact they are low cost and east to trade. A similar type of securities, exchange-traded funds (ETFs) have become popular for the same reasons.
An ETN doesn't actually hold any underlying investment as does an ETF, but rather is a contractual agreement by the issuer to pay shareholders returns equal to the investments it is designed to track. Risk is amplified by the fact that TVIX is linked to the Chicago Board Options Exchange Volatility Index, the VIX, an index that can experience wild swings. Investors make….or lose….twice as much as the daily move in the VIX.
ETNs, like TVIX, are complex investments that are not generally suitable for the average investor who may not be aware of the risks associated with this type of investment.
If you are an investor who has losses from investing in TVIX or other ETNs or ETFs that were suggested to you by your broker or financial adviser, you may be able to recover some or all of your losses. Please contact us at 561 391 1900 to discuss your legal rights. We have been helping investors nationwide recover stock-market and investment losses for over twenty years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.