‘Bankrupt in Just Two Weeks’—Individual Investors Get Burned by Collapse of Complex Securities
Seeking high returns, they poured savings into leveraged exchange-traded notes; the coronavirus downturn made some of them nearly worthless
When William Mark decided to get back into investing after the 2008 financial crisis, he looked past stocks and bonds. Needing to play catch-up with his retirement portfolio, the piping engineer decided to bet on a complicated product he hoped would deliver double-digit annual returns.
It worked so well—earning him 18% a year in dividends, on average—that he eventually poured $800,000 into the investments, called leveraged exchange-traded notes, or ETNs. When the coronavirus pandemic hit, he lost almost every penny.
This year, at least 15 ETNs managed by UBS have been taken off the market after tumbling in value. That resulted in a loss of $700,000 for Mr. Zhu, who had purchased the ETN at $13.35. We were just looking for basic income.” He is now suing his online brokerage,
TD Ameritrade Inc., alleging the company made the ETN available to individual investors without providing sufficient disclosures.
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