Securities and Exchange Commission ("SEC") Charges Adviser Over Retirees' Losses in Leveraged and Inverse Exchange-Traded Funds ("ETFs"): When an Investment Adviser Breaches Its Fiduciary Duty

dluma9

10 hours ago

5 min read

Leveraged and inverse exchange-traded funds ("ETFs") are built to be traded, not held. On October 29 and 30, 2026, the Securities and Exchange Commission ("SEC") charged a financial advisor and his firm for doing the opposite: holding these funds for years in the discretionary accounts of mostly elderly and retired clients. According to the SEC, those 54 clients lost about 70% of what went into the funds. If a registered investment adviser ("RIA") put your savings into products like these, you may have a claim. Call (914) 304-4051 for a free consultation.

What the SEC says happened

The SEC sued Cary Urich, an investment adviser representative ("IAR"), meaning a financial advisor who gives advice for an RIA, in federal court in South Carolina. It also settled with his firm, United Planners' Financial Services of America ("United Planners"), a Scottsdale, Arizona firm registered as both an investment adviser and a broker-dealer (SEC Litigation Release No. 26681; SEC Order, Advisers Act Release No. 7033).

According to the SEC's order and complaint:

From April 2020 through November 2023, Urich used his discretionary authority to put 54 advisory clients into five funds: SDS, DXD, TWM and QID, which sought two times the inverse of the S&P 500, Dow Jones Industrial Average, Russell 2000 and Nasdaq-100, and UVXY, which sought 1.5 times the daily performance of an index of short-term VIX futures.
The clients' average age in 2020 was 71. Many were retired, and the funds were often bought through retirement accounts. None had chosen "speculation" as an objective.
The funds made up about 60% of the account value Urich managed for these clients on average. Some clients had 100% of their assets in them.
The complaint alleges Urich held the positions for an average of 798 days and that the clients lost, on average, about 70% of their investments in the funds. In one example, it alleges a 93-year-old retiree with a "moderate" risk tolerance had about $1,247,000 put into these funds and lost about $746,000.

Urich's settlement is subject to court approval. United Planners settled without admitting or denying the findings.

Why holding these funds for years is the problem

Leveraged and inverse ETFs reset every day. The prospectuses quoted in the SEC's order warn that returns over longer periods "will very likely differ in amount, and possibly even direction" from the stated multiple, and that the fund "will lose money if the Index's performance is flat." Financial Industry Regulatory Authority ("FINRA") Regulatory Notice 09-31 warned in 2009 that these products are "typically designed to achieve their stated objectives on a daily basis." The SEC found Urich reviewed these warnings before investing his clients' money.

An inverse fund is also a bet that the market will fall. Held for years, it loses ground when the index rises, and daily compounding can wear away value even when the index goes nowhere. I explained the daily reset and "decay" in my earlier post on leveraged ETFs, and covered how Regulation Best Interest ("Reg BI") applies when a brokerage firm recommends these funds in last week's post on leveraged ETF claims. This case involves an RIA with discretion, where the standard is fiduciary duty.

An RIA's fiduciary duty

An RIA owes its clients a fiduciary duty, which includes acting in the client's best interest and fully and fairly disclosing material facts. The SEC found United Planners violated Section 206(2) of the Investment Advisers Act of 1940, which a finding of negligence can support.

Discretionary accounts

In a discretionary account, the financial advisor trades without asking you first. These clients initialed a statement that leveraged ETFs "may be used" and that the risks had been explained. But the SEC found they were not told the funds would be held in a way inconsistent with their short-term design. A signature on a form does not end the inquiry.

Concentration and holding period

The SEC found Urich had no reasonable basis to believe the funds were in these clients' best interests, given their ages, risk tolerances and objectives, and failed to consider whether long holds and heavy concentrations were appropriate.

Supervision failures at the firm

The firm's role matters for recovery. According to the SEC's order:

In March 2020, Urich's supervisor, compliance and the advisory group discussed the concentrations and long holds and considered limits, but the firm took no action.
Until June 2022, the firm did not meaningfully review these holdings, in part because the supervisor had no system to monitor concentrations or holding periods.
After a client filed an arbitration claim in June 2022, the firm investigated but placed no restrictions on Urich until November 2022, when its committee concluded the funds did not fit these clients.
Even then, it did not require Urich to sell. Some clients held the funds until at least November 2023, causing additional losses.

The SEC also found United Planners failed to implement its own policies and procedures (Rule 206(4)-7). The firm was censured and ordered to pay a $600,000 penalty into a Fair Fund. Urich consented to a permanent antifraud injunction, a two-year bar from the investment adviser business and a $100,000 penalty.

Why seniors and retirement savings deserve a closer look

Retirees usually cannot wait out a 70% loss. Putting an older investor's 401(k) and IRA savings into short-term trading products can raise senior investor and elder financial abuse concerns. Learn more about complex products and poor retirement advice.

A Fair Fund is not the same as your own claim

A Fair Fund distributes money the SEC collected, but there is no assurance it will cover anyone's full losses. The order anticipates private claims: United Planners agreed not to seek to reduce any damages award in a "Related Investor Action" by the penalty it paid.

How claims against an RIA are brought

Advisory agreements often require private arbitration before a forum such as the American Arbitration Association ("AAA") or JAMS. When the firm is also a FINRA-member broker-dealer, as United Planners is, FINRA arbitration may also be available, depending on the accounts and agreements. Claims can include breach of fiduciary duty, negligence, omission of material facts and failure to supervise. Deadlines apply, so act promptly.

How I can help

I represent investors in FINRA arbitration against brokerage firms, in arbitration against RIAs and in court. I served as in-house counsel at one of the largest brokerage firms and worked at one of the largest defense law firms in the world. The consultation is free, and my firm is paid only if you recover. Contact me or call (914) 304-4051.

Frequently asked questions

Is every leveraged or inverse ETF loss a claim?

No. Market losses alone are not claims. The question is whether the strategy was in your best interest and the risks were fully disclosed.

I signed a form saying leveraged ETFs might be used. Can I still bring a claim?

Possibly. Here, the SEC found clients initialed such a statement but were not told the funds would be held long term.

What if my account was a brokerage account, not an advisory account?

Reg BI generally governs brokerage recommendations. See my post on leveraged ETF claims under Reg BI.

Attorney Advertising. This post is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Prior results do not guarantee a similar outcome. The SEC's findings were made in a settlement without admission or denial, and the complaint's allegations have not been proven. Daren A. Luma, PLLC, 75 South Broadway, Suite 400, White Plains, NY 10601, (914) 304-4051.