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Soreide Law Group, PLLC, is a securities litigation firm that is committed to helping victims recover financial losses due to fraudulent or negligent conduct on behalf of stock brokers or financial advisors. We are able to represent investors nationwide in the handling of their securities... More
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  • Soreide Law Group Files A FINRA Arbitration Against Wells Fargo Advisors For The Alleged Improper Sales Of Highly Leveraged ETF Funds 0 comments
    Jul 31, 2014 2:05 PM | about stocks: FAZ, EDZ, SPXS, SCC

    Soreide Law Group filed a claim before the Financial Industry Regulatory Authority against Wells Fargo Advisors for the alleged misconduct of their former broker Timothy Fife. Former Wells Fargo broker Fife allegedly recommended to an Ohio couple to purchase all leveraged electronic traded funds or ETFS in April of 2009. The funds sold by Wells Fargo were the Direxion's Financial Bear 3x inverse the market (NYSEARCA:FAZ), Emerging Markets 3x inverse (NYSEARCA:EDZ), Large Cap Bear 3x inverses (NYSEARCA:SPXS), ProShares Ultra Short Consumer Services and Financials (NYSEARCA:SCC).

    The funds allegedly selected by Fife, all seek 3 times the performance or benchmark of the fund or index they are tracking. They are highly leveraged and were designed for a day trade (not buy and hold). Many brokers misunderstood the makeup of these leveraged exchange traded funds or ETFs and held them as long positions. Over time due to the derivative nature of these products many of these named ETFs began to cannibalized themselves and not perform as promised. WELLS FARGO was fined by FINRA for selling risky ETFs in large concentrations and utilizing a buy and hold strategy to their unsuspecting investors.

    FINRA released a Regulatory Notice 09-31 which specifically outlined brokerage firm's sales practice obligations relating to leveraged and inverse exchange-traded funds. In FINRA notice 09-31 states, "Most leveraged and inverse ETFs 'reset' daily, meaning that they are designed to achieve their stated objectives on a daily basis. Due to the effect of compounding, their performance over longer periods of time can differ significantly from the performance (or inverse of the performance) of their underlying index or benchmark during the same period of time." Wells Fargo and Fife allegedly failed to heed this warning and were negligent in their recommendations to hold these positions for the long term, while the market was rapidly heading in the exact opposite direction.

    In Fife's career as a stock broker he has racked up no less than 10 reported customer complaints and 1 criminal complaint on his U4. The complaints include but are not limited to conduct involving: breach of fiduciary duty, breach of contract, violations of state securities laws, deceptive trade practices, fraud, unsuitability, unauthorized trading. The significance of Fife's ten reported customer complaints is underscored in FINRA NOTICE to MEMBERS 03-49. In 2003, FINRA conducted a review of the CRD's of all 663,000 registered representatives, only 2,751 (.41%) had been the subject of (3) or more customer complaints. In other words Fife's customer complaints rank him in the top one-hundredth percent of all registered representatives for customer complaints.

    If you purchased leveraged ETFs through Timothy Karl Fife and Wells Fargo Advisors, please contact Soreide Law Group for a free consultation at (888) 760-6552 or visit http://www.SecuritiesLawyer.com.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: FAZ, EDZ, SPXS, SCC Stocks: FAZ, EDZ, SPXS, SCC
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