Stockholders v ProShares Trust : ProShare Advisors LLC : ProShares UltraShort Financials Fund
Stockholders File Lawsuit Against ProShares Trust : ProShare Advisors LLC : ProShares UltraShort Financials Fund
According to a press release dated August 21, 2009, ProShares sells its Ultra and UltraShort ETFs as "simple" directional plays. As marketed by ProShares, Ultra ETFs are designed to go up when markets go up; UltraShort ETFs are designed to go up when markets go down. The SKF Fund is one of ProShares' UltraShort ETFs. The SKF Fund seeks investment results that correspond to twice the inverse (-200%) daily performance of the Dow Jones U.S. Financials Index ("DJFIX"), which measures the performance of the financial services industry of the U.S. equity market. Accordingly, the SKF Fund is supposed to deliver double the inverse return of the DJFIX, which fell approximately 51.03 percent from January 2, 2008 through December 17, 2008, ostensibly creating a sizable profit for investors who anticipated a decline in the U.S. financial services industry. In other words, the SKF Fund should have appreciated by 102.06 percent during this period. However, the SKF Fund only appreciated by approximately 1.06 percent during this period -- hardly a directional play.
The complaint alleges the Defendants violated the Securities Act by failing to disclose that the SKF Fund is altogether defective as a directional investment play, failing to perform anywhere near investors' reasonable expectations. Defendants failed to disclose the following risks in the Registration Statement: (1) inverse correlation between the SKF Fund and the DJFIX over time would only happen in the rarest of circumstances, and inadvertently if at all; (2) the extent to which performance of the SKF Fund would inevitably diverge from the performance of the DJFIX -- i.e., the probability, if not certainty, of spectacular tracking error; (3) the severe consequences of high market volatility on the SKF Fund's investment objective and performance; (4) the severe consequences of inherent path dependency in periods of high market volatility on the SKF Fund's performance; (5) the role the SKF Fund plays in increasing market volatility, particularly in the last hour of trading; (6) the consequences of the SKF Fund's daily hedge adjustment always going in the same direction as the movement of the underlying index, notwithstanding that it is an inverse leveraged ETF; (7) the SKF Fund causes dislocations in the stock market; (8) the SKF Fund offers a seemingly straightforward way to obtain desired exposure, but such exposure is not attainable through the SKF Fund.
If you bought ProShares Trust : ProShare Advisors LLC : ProShares UltraShort Financials Fund securities and would like to obtain information about the ProShares Trust : ProShare Advisors LLC : ProShares UltraShort Financials Fund lawsuit, then you are invited to call Kahn Swick & Foti, LLC toll free at (866) 467-1400 extension 100 to speak with an attorney or visit www.ksfcounsel.com.
