How is an XIV lawsuit even possible?
- Thread starter prc117f
- Start date
Interesting. Do issuers of securities have the authority over actions of investors? I couldn't find such a directive in their prospectus. Do you mind to provide exact quote.
http://app.velocitysharesetns.com/f...Final_Pricing_Supplement_AR48_long_form_2.PDF
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Says it right there. "Daily basis" and "and may not suitable for investors who plan to hold longer than one day"
The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks. They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives. The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be suitable for investors who plan to hold them for longer than one day
The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks. They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives. The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be suitable for investors who plan to hold them for longer than one day
This is just a warning to investors of the risks, not a ban on holding positions overnight, and that does not release them from obligation to use a proper risk management themselves to avoid a blow up. Unless shutting down the etn at some point was in their plans all along.
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But they warn about doing this yet people held this like it was a regular ETF. I would throw out such a lawsuit people chose to gamble on risky products and lost.
Page PS-45 and 46. Subparagraph (d)
There is a risk of holding position intraday also. The fund is down 9% today intraday, more than the underlying futures. Nothing to do with holding positions overnight. The issue is the liquidation. How is it different from a hedge fund which blew investors money and was forced to shut down? Poor risk management by the managers. Any valid business should have instinct of self-preservation.
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They've been very clear in their information. And even if a trader didn't bother to read the prospectus, he or she should have been well aware that holding these instruments overnight put them at great overall market risk. The responsibility in this case is clearly on the trader, not on the offering company.
"If an investor holds the ETNs for more than one day, it is possible that the investor will suffer significant losses in the ETNs even if the performance of the underlying index over the time the investor holds them is positive, in the case of the leveraged long ETNs, or negative, in the case of the leveraged inverse ETNs."
The liquidation of the fund seems more like default on the bond on their part. There have to be repercussions.
The fund behaved as it was supposed to, tracking its index. The fact the index lost 95% is bad, but the investors bought it and should have known it was a risk since all those risks were laid out in the prospectus if they read it.
Of course they'll get sued. It's America - you can sue people for anything. Winning is another story, and I wouldn't bet on their odds of collecting anything. Maybe if your financial advisor put you in this, then you can sue him.
Of course they'll get sued. It's America - you can sue people for anything. Winning is another story, and I wouldn't bet on their odds of collecting anything. Maybe if your financial advisor put you in this, then you can sue him.