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MARKET COMMENT 

Dave Fry’s ETF Digest, July 28, 2009

Big Brother (FINRA) has given Wall Street firms the cover to restrict ProShares, Direxion, Rydex and PowerShares products from use by their clients. This is being done under the guise of protecting them but that’s a smokescreen. You see these firms live and die off residual fee income generated by wrapped high fee products within financial plans. It’s very disruptive to fee income for FAs and clients to mess with the plan. It is no longer permitted to use them denying the investor and FA the choice and opportunities they present. Rather than allow your FA to protect you from 40-60% bear market losses they want you to stick with these plans and keep chucking the money to them. Some firms are even going so far as restricting the use of unleveraged short products which is downright silly but shows you the extent firms will go to protect the flow of fee income.

Here’s a typical wire house message sent to the troops purportedly by Morgan Stanley:

Policy Change on Inverse and Leveraged20ETFs
In June FINRA issued a Regulatory Notice indicating that inverse and leveraged ETFs that are reset daily, typically are unsuitable for retail investors who plan to hold them longer than one trading session, particularly in volatile markets… 

 

 
 

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