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UBS Pulls ETRACS Exchange-Traded Note (ETN) Off Market as Value Plunges to Near Zero

June 3, 2020 Blog

Individual investors who purchased ETRACS leveraged exchange-traded notes (ETNs) from UBS prior to March 2020 are facing substantial losses – so much so that UBS has pulled the product off of the market for new investors. While some will point to the economic impacts of the novel coronavirus (COVID-19) pandemic as the reason for these investors’ losses, the reality is that UBS’s ETRACS ETN was a high-risk investment from the outset, and it was only a matter of time until investors’ portfolios went into the red.

ETRACS ETNs are High-Risk Investments for Individual Investors

UBS’s ETRACS leveraged ETNs are complex investments that inherently entail a high level of risk. As UBS states on its website, “ETRACS [ETNs] are senior, unsecured, unsubordinated debt securities that are designed to track the total return of a specific market index, less investor fees. An investment in ETRACS ETNs involves risks, including possible loss of principal, and may not be suitable for all investors.”

However, this explanation belies the truth of just how risky these investments really are. A recent article from The Wall Street Journal discusses the risks in detail, and recounts the stories of several individuals who have sustained huge losses. Many of these investors are now suing UBS and TD Ameritrade for investment fraud, alleging that they were not adequately informed of the risks involved with UBS’s ETRACS ETNs.

As reported by The Wall Street Journal:

“Banks and brokerages advertised [ETNs such as UBS’s ETRACS leveraged ETN] as offering payouts both steadier and more lucrative than plain-vanilla investments such as bonds or index-tracking funds. Most professional money managers avoided them. For many less sophisticated retail buyers, the market blowup taught the kind of painful lesson that comes with just about every economic crisis: There is no such thing as an investment that is both safe and highly profitable.”

For many investors, the leveraging of their ETNs (which involves borrowing money in order to invest) has resulted in double or triple the losses they would have sustained with a more-traditional investment. Additionally, since UBS retained the right to redeem investors’ ETNs in the event that the market crashed, many investors have been forced to realize these losses and accept a return of, “just a fraction of what they originally paid.”

Have You Suffered Losses in UBS ETRACS Leveraged ETN Investments?

If you have suffered losses in UBS ETRACS leveraged ETN investments, you may be eligible to recover your losses through FINRA arbitration. Arbitration provides a forum for investors to recover their fraudulent losses without going to court. Our firm represents numerous UBS investors who have suffered substantial losses investing in ETRACS leveraged ETNs and other investment products, and we can help you recover financially if your losses are the result of investment fraud.

Speak With an Investment Fraud Attorney for Free

Have you recently lost money investing in UBS’s ETRACS leveraged ETNs? If so, we encourage you to schedule a free initial consultation with one of our investment fraud attorneys. To discuss your situation in confidence, call 212-742-1414 or inquire online now.

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