Reuters: Regulatory News: UPDATE 1-FINRA to bring cases over leveraged, inverse ETFs

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UPDATE 1-FINRA to bring cases over leveraged, inverse ETFs Apr 18th 2012, 17:43 Wed Apr 18, 2012 1:43pm EDT April 18 (Reuters) - The Financial Industry Regulatory Authority will bring enforcement cases against certain brokerages for selling exchange-traded funds that were not appropriate for their customers, the Wall Street regulator's enforcement chief said Wednesday. FINRA enforcement chief Bradley Bennett told Reuters that the cases will be related to unsuitable sales of leveraged and inverse exchange-traded funds. The cases will also involve allegations of improper or inadequate training for brokers who sell ETFs, he said. Bennett declined to name the firms involved. Leveraged and inverse ETFs are designed to amplify short-term returns by using debt and derivatives and are more suitable for professional traders than for long-term retail investors. But FINRA is concerned that brokers are selling these products to long-term retail investors, despite the dangers with holding on to these products for more than a day. "We don't have a qualm with the product," Bennett told Reuters. "We just want to make sure that people who are selling them understand them." On Wednesday, Bennett told lawyers who attended a presentation at the New York-based Practising Law Institute, a training organization for lawyers, that the cases would "make statements" about what brokerages need to ensure their brokers are trained properly and sell the securities to appropriate customers.

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