The Financial Industry Regulatory Authority on Tuesday said it has sanctioned four banks and fined them a collective $9.1 million over improper sales of leveraged and inverse exchange traded funds.
The four firms are Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS) and UBS (NYSE: UBS).
FINRA said the financial companies were fined for selling leveraged and inverse ETFs “without reasonable supervision and for not having a reasonable basis for recommending the securities.”
Leveraged ETFs are designed to magnify the returns of a market or sector for a specific time period, usually one day. Inverse funds provide short exposure and let investors profit from market declines or hedge long portfolios.
Firms that manage leveraged and inverse ETFs such as ProShares and Direxion stress the products are designed as trading vehicles rather than buy-and-hold funds.