Salas Wang LLC is launching an investigation into Oppenheimer & Co. relating to Non-Traditional Exchange Traded Funds (ETFs). A recent Acceptance Waiver and Consent (AWC) with FINRA reveals significant supervisory failures that harmed retail investors.
What FINRA Found
"The firm failed to employ any surveillance or exception reports to effectively monitor the holding periods for non-traditional ETFs, so certain retail customers held non-traditional ETFs in their accounts for weeks, months and sometimes years, resulting in substantial losses."
Why Non-Traditional ETFs Are Dangerous for Long-Term Holders
FINRA has issued explicit guidance warning against holding leveraged and inverse ETFs beyond a single trading session:
"Exchange-traded funds (ETFs) that offer leverage or that are designed to perform inversely to the index or benchmark they track or both are growing in number and popularity. While such products may be useful in some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis. Due to the effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective. Therefore, inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets."
The Firm's Obligation
Broker-dealers have a duty to implement supervisory systems that actively monitor for unsuitable investment behavior. Oppenheimer's failure to use surveillance reports or exception reports to detect long-term holding of non-traditional ETFs represents a clear breach of this obligation.
Key supervisory failures identified:
- No surveillance or exception reporting for ETF holding periods
- Retail customers allowed to hold complex instruments far beyond appropriate timeframes
- Substantial documented losses resulting from the failure to act
How to Recover Your Losses
If you lost money investing in non-traditional ETFs through Oppenheimer & Co., please contact Salas Wang LLC at 312.803.4963 for a free portfolio review. You may be eligible to recover your losses through FINRA arbitration.