Canadian Investor group blasts makers of leveraged ETFs

angryAn investor rights group on Thursday blasted the makers of leveraged ETFs and urged regulators to enforce tighter standards for disclosure and advertising in a market that has swelled to $2.5-billion in assets just two years.

The Foundation for Advancement of Investor Rights (FAIR) said regulators should require sellers of leveraged and inverse exchange-traded funds — made only by BetaPro Management Inc. in Canada — to file a new prospectus carrying an explicit warning that they are not suitable for holding longer than a few days “nor are they for virtually all retail portfolios.”

“There’s a lot of detailed disclosure in the prospectus about risk but nowhere does it bluntly tell you you could be completely right in your selection of an ETF and find out that despite being right, you lose money,” said Ermanno Pascutto, FAIR executive director. “In several cases, no matter which way you bet over the past year, you would have lost money.”

A former regulator himself, Mr. Pascutto founded FAIR a year ago with funding from the predecessor to the Investment Industry Regulatory Organization of Canada.

Full Story: http://www.financialpost.com/creditcrunch/story.html?id=1597265

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