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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • WATCH OUT UNITED STATES INVESTORS--JP MORGAN ETN STOPPED ISSUING NEW SHARES 0 comments
    Nov 29, 2012 10:08 AM

    JPMorgan has ceased issuing new shares of the master limited partnership exchange-traded note JPMorgan Alerian MLP Index ETN (Symbol: AMJ). The ETN posted a note on its web page explaining that it stopped issuing new shares because the maximum number of shares allowed had been reached ("Red flag at popular ETN," by Jason Kephart, InvestmentNews).

    This means that the ETN is now likely to trade at a premium or a discount to the net asset value of the underlying assets. According to the article, the share price is likely to rise to a premium above net asset value, because of the demand for the hefty dividends of master limited partnerships. On the other hand, if the master limited partnership sector sells off, the ETN's share will probably trade at a discount.

    This is a "red flag" because JP Morgan might resume issuing shares after a spike in the share price which could lead to a collapse of the share price down to the net asset value or lower. That is what happened earlier this year to investors in the Credit Suisse VelocityShares Daily 2X VIX Short-Term ETN (Symbol: TVIX). Credit Suisse stopped issuing new shares in February after which the shares doubled in value. When Credit Suisse resumed issuing shares in March, however, the ETN's share price took a nose dive that wiped out $172 million in one day.

    Various regulators have said they are looking into sales practices involving ETNs. Exchange traded notes come with high fees and expenses that are hidden from plain view. While Morningstar and CNNMoney list fees for exchange traded notes, "ETNs may calculate expenses differently or levy more charges-then bury that information in a pricing supplement to the prospectus," according to Penelope Wang ("Beware a Risky ETF Look-alike," CNNMoney). "ETN fees can be extremely hard to find and calculate," agrees Morningstar ETF analyst Samuel Lee.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

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