Do leveraged and inverse
have adequate disclosures?
The answer is "yes" according to a September 10 ruling from the
United States District Court for the Southern District of New York.
The court rejected the plaintiffs' claim that certain risks
associated with holding leveraged and inverse ETFs for periods
longer than one day were omitted from the disclosures set forth in
the registration statements.
"We have maintained since the beginning of this case that the
allegations were wholly without merit, and we are pleased that the
claims have been dismissed in their entirety," said Amy Doberman,
ProShares' General Counsel. "ProShares has demonstrated a
long-standing commitment to educating investors about our products
and their risks and benefits, so it is gratifying that Judge
Koeltl's ruling rests on the strength and quality of our
The class action lawsuit was filed against ProShares in
In his order dismissing the case, Judge John G. Koeltl ruled
that the registration statements accompanying ProShares leveraged
and inverse ETFs stated "in plain English" their daily performance
objectives and clearly disclosed the possibility that "the ETFs'
value could diverge significantly from the underlying index when
the ETFs were held for longer than one day."
Judge Koeltl's ruling concluded that ProShares disclosures
"addressed the relevant risk directly" in a way that any
"reasonably prudent investor would have understood."
Popular ETFs offered by the company include the ProShares Ultra
Silver ETF (NYSEARCA:AGQ), ProShares Ultra S&P 500
(NYSEARCA:SSO), and the ProShares Ultra Financials
ProShares' lineup of 138 ETFs includes Global Fixed Income,
Hedge Strategies, Geared (leveraged and inverse), and Inflation and
Volatility ETFs. At the end of June 30, ProShares managed $23.8
billion in ETF assets.
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