Zamansky LLC Investigates Insight Securities Over Customer Losses In Leveraged and Inverse Exchange Traded Products

In December 2022, Insight Securities Inc. (“Insight Securities”) in Highland Park, Illinois, agreed to a censure and fine of $25,000 in a regulatory settlement with FINRA, the Financial Industry Regulatory Authority. This disciplinary action was the result of FINRA’s allegations that Insight Securities, from March 2017 and June 2020, failed to reasonably supervise recommendations of non-traditional exchange-traded products such as leveraged and inverse-exchange traded notes (ETNs).  Due to their complexity and risk, leveraged and inverse ETNs are rife for potential investment fraud.

Leveraged and Inverse ETNs May Be Too Risky For Certain Investors

Non-traditional exchange-traded products such as leveraged and inverse ETNs are a category of complex structured products that can be difficult for investors to see the downside risk.  Typically, leveraged ETNs may offer a fixed rate that is attractive to an investor who is retired or seeks income.  However, the ETN may carry a hidden downside risk that is not clear until the market or a reference security falls in value, putting a loss to the investor.

Investors need to be aware that all ETNs –- no matter how they are labeled — can be aggressive and high-risk products that are not safe for income-seeking investors or retirees.  Many ETNs do not guarantee a return of the investor’s principal at maturity but can be redeemed earlier, usually at the worst time. . Therefore, depending on the performance of the underlying reference index or asset, customers who purchase such products could lose some or all of their principal at maturity.

With the market downturn in 2022, investors may be surprised by losses from leveraged and inverse ETNs which had more downside risk than they ever expected. The unknown downside risk is usually a sign of potential investment fraud, says Jake Zamansky, investment fraud attorney, and any investor with losses that they did not expect should have their portfolio reviewed.

What an Investor Can Do

If you invested in a leveraged or inverse ETN through Insight Securities and wish a review of whether you may have a legal claim to recover your losses due to investment fraud, please call investment fraud attorney Jake Zamansky at (212) 742-1414 or email jake@zamansky.com for a free evaluation of your potential legal rights.