FINRA and SEC Warn on Leveraged and Inverse ETFs

The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) have issued an Investor Alert called Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors warning retail investors of the risks associated with investing in these highly complex financial products. This Investor Alert follows a recent FINRA Regulatory Notice reminding securities firms and brokers of their sales practice obligations relating to leveraged and inverse exchange-traded funds (ETFs).

The SEC and FINRA are advising investors to consider leveraged and inverse ETFs only if they are confident the product can help meet their investment objectives and they are knowledgeable about and comfortable with the risks associated with these specialized ETFs. Because these products are complex and can be confusing, investors should consider seeking the advice of an investment professional who understands these products, can explain whether or how they fit with the individual investor’s objectives, and who is willing to monitor the specialized ETF’s performance for his or her customers.

Investor Resources

The investor alert includes a series of questions to consider before investing in leveraged or inverse ETFs.  For a list of local financial advisors who are knowledgable about exchange traded funds, see the ETF Advisor Directory.

FINRA,, is the largest independent regulator for all securities firms doing business in the United States.

See the ETF Directory for a complete listing of leveraged and inverse ETFs.