Exchange traded funds are making a splash in the investment world as more investors start including the investment tool in their portfolios. However, people should not blindly invest in anything before fully understanding what they are getting themselves into, as some brokerage firms painfully find out.
The Financial Industry Regulatory Authority found that Berthel Fisher & Company Financial Services Inc. had inadequate oversight on sales of alternative investments, such as derivatives-backed ETFs, and fined the firm $775,000 for failure to properly supervise the sales, reports Matthias Rieker for the Wall Street Journal.
Finra has been looking into inverse and leveraged ETFs that use futures or derivatives to produce multiple daily returns of an index. The regulator has found that some brokers who sold the ETFs did not fully understand how the products work or the risks involved.
Berthel Fisher has stopped offering leveraged and inverse ETFs to clients.