But that doesn’t satisfy Public Investor Advocacy Bar Association (PIABA) President Michael Edmiston, who said in his letter to Finra that attorneys who represent wronged investors see a multitude of abuses from reps and even registered investment advisors (RIAs).
"Despite FINRA’s clear identification of the significant problem with investments in leveraged and inverse ETFs longer than a day and its clear warning to member firms, our members continue to see investors who have been victimized by inappropriate longer-term holding of positions in these complex products,” Edmiston said.
PIABA is also concerned with what Edmiston termed “the dramatic rise of options trading,” which poses serious risks for retail investors who do not understand the characteristics or risks related to the product. In April, FINRA censured and fined Berthel, Fisher & Co. Financial Services, Inc. $100,000 for failing to supervise unsuitable options trading activity for a senior citizen, he noted.
“Perhaps worse still, our members are seeing an uptick in small RIA firms using complex options strategies that the advisers themselves do not understand,” Edmiston said. “These RIA firms typically use FINRA member firms to execute their strategies. The brokerage firms disclaim any responsibility for the trading, placing that responsibility on the RIA. However, investors do not understand that they are dealing with two separate entities, each of which have limited responsibilities and obligations,” he added.
Listed options trading volume has jumped 30% since 2020 and almost 100% since 2019 to more than 38.6 million contracts a day, Finra noted.