US law firms are filing class action lawsuits for investors in ProShares short financial and short emerging markets funds, citing false and misleading prospectuses, registration statement and information.
Gilman and Pastor filed a class action lawsuit on September 2 on behalf of investors with shares in the UltraShort MSCI Emerging Markets ProShares fund.
The legal firm says the fund is designed to deliver twice the inverse performance of the MSCI Emerging Markets index, which fell by around 52% from January 2 2008, through to December 17 last year.
However, Gilman and Pastor highlights that although the fund should have increased by 104% during this period, it fell by around 30%. The complaint states that ProShares violates the Securities Act by not disclosing this risk among others, such as noting the likelihood of spectacular tracking error.
Similarly, the securities law firm Tramont Guerra and Núñez issued a notice on Friday to investors in the ProShares Advisors UltraShort Financials ETF alleging that ProShares failed to properly structure the ETF to perform in a way which was consistent with the investment prospectus.
The firm says the UltraShort Financial ETF price failed to move with a 200% inverse correlation in relation to the Dow Jones US Financials index, and states that although the index fell by 51.03% the fund only increased by 1.06%, from January 2 2008 until December 17 last year
The filings follow recent clarifications by regulators such as the Financial Industry Regulatory Authority on the extra risks of leveraged and inverse ETFs for buy-and-hold investors.
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