UBS ETRACS ETN Value Drops to Near Zero

UBS Financial and TD Ameritrade brokers who recommended UBS ETRACS exchange-traded notes named in lawsuits.

The Sonn Law Group is investigating allegations that brokers unsuitably recommended investments in UBS ETRACS ETNs. If you or a family member has suffered losses investing in UBS ETRACS ETNs, we want to discuss your case. Please contact us today for a free review of your case.

Sonn Law Group is investigating allegations that brokers from UBS Financial Services and TD Ameritrade recommended to their clients that they invest in UBS ETRACS exchange-trade notes (“ETNs”), despite the fact that these investments are unsuitable for many investors.

Many investors have initiated lawsuits against UBS and TD Ameritrade for investment fraud, alleging that they were not adequately informed of the risks associated with investments in ETRACS ETNs.

Wall Street Journal reported:

Banks and brokerages advertised [ETRACS ETNs] as offering payouts both steadier and more lucrative than plain-vanilla investments such as bonds or index-tracking funds. Most professional money managers avoided them. For many less sophisticated retail buyers, the market blowup taught the kind of painful lesson that comes with just about every economic crisis: There is no such thing as an investment that is both safe and highly profitable.

For many investors, the leveraging of their ETNs (which involves borrowing money in order to invest) has resulted in double or triple the losses they would have sustained with a more-traditional investment. Additionally, because UBS retained the right to redeem investors’ ETNs in the event that the market crashed, many investors have been forced to accept these losses and accept a return of a small fraction of what they invested.

UBS ETRACS ETNs are unsecured debt securities designed to track the total return of a certain market index. UBS characterizes the notes as “senior” and “unsubordinated.” Unsubordinated debt, or senior debt, must be repaid before any other form of debt. If the debtor goes bankrupt, holders of this type of debt are the first to be paid. 

The value of the ETNs has plummeted approximately 60%, triggering mandatory redemption and raising questions about sales practice violations by brokers who recommended the investments. 

During March 2020, the COVID-19 pandemic caused the global markets to crash which resulted in mandatory redemption of these ETRACS at losses of 60% or more to investors:

• ETRACS Monthly Pay 2xLeveraged U.S. High Dividend Low Volatility ETN (HDLV)
• ETRACS Monthly Pay 2xLeveraged US Small Cap High Dividend ETN (SMHD)
• ETRACS Monthly Pay 2xLeveraged Diversified High Income ETN (DVHL)
• ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN (CEFL)
• ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN (CEFZ)
• ETRACS 2xLeveraged Long Wells Fargo Business Development Company Index ETN (BDCL)
• ETRACS 2xLeveraged Long Wells Fargo Business Development Company ETN (LBDC)
• ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN (MORL)
• ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN (MRRL)
• ETRACS Monthly Pay 2xLeveraged MSCI US REIT INDEX ETN (LRET)
• ETRACS 2x Monthly Leveraged Alerian MLP Infrastructure Index ETN (MLPQ)
• ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (HOML)
• ETRACS 2xMonthly Leveraged S&P MLP Index ETN Series B (MLPZ)
• ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN (LMLP)
• ETRACS ProShares Daily 3x Inverse Crude ETN linked to the Bloomberg WTI Crude Oil Subindex (WTID)

Financial advisors are required to make suitable investment recommendations, accounting for your age, income, net worth, investment experience, and investment objectives.  Sonn Law Group is investigating whether brokers who recommended these investments sufficiently disclosed their risks to investors. UBS Financial advisors should not have sold risky ETRACS to retirees or other conservative investors who needed income or principal preservation.

Contact Sonn Law to Discuss Recovery Options

If you suffered losses investing in UBS ETRACS ETNs, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.