From the November 2012 issue of Research Magazine • Subscribe!

October 24, 2012

Lawsuit Against ProShares Dismissed

Do leveraged and inverse ETFs have adequate disclosures? 

The answer is “yes” according to a Sept. 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.

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.” The class action lawsuit was filed against ProShares in 2009.

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