Haselkorn and Thibaut, P.A. is conducting an investigation into the advice given by UBS Financial Services Inc. (UBS) and other entities to their investors, particularly looking into possible violations of sales practices concerning the distribution of ETRACs (Symbols: UBS ETRACs: SMHD, DVHL, CEFL, CEFZ, BDCL, HDLV, LBDC, MORL, MRRL, LRET, MLPQ, HOML, MLPZ, LMLP, SMHD, and WTID to investors. These UBS ETRACs, which are exchange-traded notes (ETNs), are primarily designed to follow and provide monthly income based on various market indices.

Last month the coronavirus caused extreme market volatility and caused many of the ETRACs to trigger a “mandatory redemption” some at a 60% or more loss.

Haselkorn and Thibaut, P.A. ( has launched an investigation into these issues nationwide, and they are interested in hearing from retail investors who received recommendations to purchase ETRACs by UBS Financial Services and other firms overseen by the Financial Industry Regulatory Authority (“FINRA”).

The focus of this investigation is the manner in which financial advisors represented these ETRAC investments to their clients, and whether or not there were adequate and appropriate risk disclosures relating to these particular investment products.

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Many of the UBS ETRACS investments are very risky, because of the manner in which they involve an underlying strategy that utilizes leverage, which makes them particularly risky in volatile market conditions. In addition, Exchange Traded Notes (ETNs) especially those engaged in these types of strategies and utilizing leverage can also be quite complex. As leveraged ETNs, they amplify the returns of the underlying index they are tracking.

This is generally considered a complicated and high-risk strategy that is probably not appropriate for conservative investors. According to Matthew Thibaut, Esq., a name partner at Haselkorn & Thibaut, P.A., “…the sale of risky and complex securities products without proper or adequate risk disclosure by UBS or any other firm is contrary to the law, rules, and regulations of the securities industry.”

Further adding to the complexity of the ETN products is the fact that ETNs are a type of unsecured debt that tracks an underlying index of securities and transactions on a significant exchange as a stock would. ETNs are similar to bonds, but pay no interest. Instead, the price fluctuates similarly to the price of a stock share. For some retail investors, this type of product can be quite confusing.

A financial institution generally issues ETNs to base the returns on a market index. Upon maturity, the financial institution deducts the fees and gives the investor cash based on the performance of the index it is tracking.

ETNs do not represent investor ownership of the securities but receive a return based on what the underlying index produces. Investors should be confident that the issuing financial institution will deliver on the performance based on the underlying index.

Barclays Bank PLC issued ETNs for the first time, and now many other issuers have entered the market, traditionally issuing at $50.00 per share. Risks include, but are not limited to, an index that falls (or does not rise enough to cover the fees), and the investor will receive a lesser amount at maturity than was initially invested.

ETN’s ability to repay principal, plus any traced index earnings, depends on the issuer’s financial viability. As a result, the value of an ETN is affected by the issuer’s credit rating, and a decline in the issuer’s credit rating can cause a price decrease even without a change in the underlying index.

Additional risks include default risk, the risk of closure if the ETN can be closed before the expiration date. There could also be follow-up risks, including follow-up errors and other risks.

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