The Rosca Scarlato LLC law firm attorneys are announcing the Securities America Advisors investigation in the wake of the Securities and Exchange Commission (SEC) Cease and Desist Order in relation to allegedly selling two high risk investments to clients. According to the SEC Order, between January 1, 2016 through February 28, 2018, investment adviser representatives from Securities America Advisors allegedly recommended, purchased, and sold two volatility-linked exchange traded products, VelocityShares Daily Inverse VIX Short Term ETNs linked to the S&P 500 VIX Short-Term Futures Index (XIV) and Proshares VIX Short-Term Futures ETF (VIXY). Both XIV and VIXY were tied to the performance of S&P 500 VIX Short-Term Futures Index ER (Index).
The SEC reports that Securities America Advisors allegedly failed to adopt and implement policies and procedures that require investment adviser representatives to have an adequate basis to make investment recommendations for clients that are suitable for their investment profile. In addition, the firm failed to design policies and procedures specifically for volatility-linked exchange traded products and as a result, clients suffered significant losses from investments in these products.
Investor rights attorney Alan Rosca and his colleagues are currently reviewing the SEC Order Instituting Administrative and Cease-and-Desist Proceedings against Securities America Advisors for allegedly selling the XIV and VIXY high risk investments. Securities America Advisors customers who are concerned they might have been recommended inappropriate investments such as XVI and VIXY should contact attorney Alan Rosca for a free case evaluation or discussion of recovery options. Call 888-998-0530, via email at arosca@rscounsel.law, or fill out the contact form on this webpage.
What Investors Should Know About XIV and VIXY Volatility-Linked Exchange Traded Products
According to the SEC records, XIV is an exchange-traded note issued by Credit Suisse AG and designed to provide a return based on the inverse of the daily performance of the Index. XIV was marketed as a product made for sophisticated investors to manage daily trading risks, SEC reports.
VIXY is an exchange-traded fund sponsored by ProShare Capital Management, designed to provide results for a single day and over time that match the performance of the Index, the SEC states. The offering materials described VIXY as a product made for investors who understand the consequence of seeking exposure to VIX contracts and for short term investments, the SEC reports.
Both XIV and VIXY provide similar pricing supplements for each issuance including warnings about the product and the investors whom it is intended for. These are high risk investments made for sophisticated, knowledgeable investors, according to the SEC.
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Securities America Advisors Allegedly Failed to Implement Policies and Procedures for Advisory Clients
The Securities America Advisors investigation conducted by investor rights attorney Alan Rosca revealed regulatory allegations that Securities America Advisors was aware that certain investment advisers were investing in XIV and VIXY on behalf of retail clients or were recommending retail clients to buy and hold the products for longer periods of time.
The firm allegedly failed to determine if investment advisers were fulfilling their fiduciary obligations when investing clients in, or recommending XIV and VIXY, according to regulatory records.
In addition, the firm failed to identify if the products could be traded in discretionary accounts and as a result, client accounts held XIV or VIXY for an average of 32 days and suffered significant losses, according to the SEC Order
Reportedly, 56 investment advisers purchased and sold XIV and VIXY in approximately 283 Securities America Advisors clients’ accounts, in addition, there were more than 1,400 purchase and sale transactions in XIV and VIXY in at least 130 discretionary accounts, the SEC reports.
The firm’s investment advisers allegedly invested in or recommended XIV and VIXY for clients with low risk tolerances or who had high concentration levels of the products. Investment advisers could also change a client’s risk tolerance in the firm’s books and record without obtaining consent from the client, the SEC alleges. Reportedly, over time investment advisors would typically send the client a letter with the client’s updated profile information but the letter did not contain the specific changes that were made to the client’s profile. Approximately 156 retail advisory accounts suffered significant losses, the SEC reports.
According to the SEC, Securities America Advisor’s policies and procedures required investment advisors, among other things, to consider a client’s risk tolerance, investment objective, age, net worth, and annual income. These policies and procedures contained definitions and descriptions of numerous suitability criteria. The firm allegedly did not provide proper training to investment advisers who engaged in secondary market purchases of products like XIV and VIXY.
In addition, the firm lacked other policies and procedures such as requiring proper documentation, certification, monitoring, or requiring investment advisers to have an adequate basis for their investment decisions and recommendations.
Reportedly, Securities America Advisors have a policy and procedure that allows properly licensed investment advisors to make discretionary trades on no-load mutual funds, load funds at net asset value, variable annuity sub-accounts, stocks, bonds, and covered equity options. XIV and VIXY are not among the products that investment advisors of the firm are authorized to trade on a discretionary basis.
Finally, it is important to note that, as of the date of this article, there has not been a finding of liability as to the allegations mentioned in this article, unless otherwise indicated.
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Potential Recovery Options for Securities America Advisors Investors
Rosca Scarlato LLC law firm represents investors who were recommended inappropriate investments and are currently investigating Securities America Advisors’ alleged selling the XIV and VIXY high risk volatility-linked investments to Securities America Advisors clients.
The firm takes most cases of this type on a contingency fee basis and advances the case costs, and only gets paid for their fees and costs out of money recovered for clients. Attorney Alan Rosca, a securities lawyer and adjunct professor of securities regulation, has represented thousands of victimized investors across the country and around the world in cases ranging from arbitrations to class actions.
Securities America Advisors investors concerned they were recommended inappropriate, unsuitable investments such as XIV and/or VIXY are encouraged to contact Alan Rosca for a free no-obligation evaluation of their recovery options, at 888-998-0530, via email at arosca@rscounsel.law, or through the contact form on this webpage.