EFT fraud? Specialist question.

GeoffTF

k6chris said:

Does the Bid-Ask spread widen on ETFs in the way that it would do on an illiquid share??

Yes, of course it does.

dunstonh

I would think that there must be a bold warning if placing a stop loss could result in a sale of 22% of under the market value, don't you?

All risk warnings are risk warnings.   The problem is that the risks will vary in importance with different people.  And different risks will impact at different times.  So, which do you make bold?    What happens if a risk event that is not bold occurs?  Does the person then claim that one should be made bold?

Also, remember that this was a direct to consumer provider taking instruction from an individual who was choosing to reduce their level of consumer protection to save money.   ETFs are a more advanced instrument than UT/OEICs. So, require greater knowledge and understanding by the person that has chosen to DIY.     

eskbanker

dunstonh said:

What ETF was it?

GeoffTF said:

What was the ETF?

k6chris said:

OP - Which ETF?

OP did clarify early on, assuming they meant WISDOMTREE S&P 500 3X DAILY LEVERAGED (3LUS):

debaura12 said:

The broker claimed the eft (3lus) hit a ‘yellow band’ - the platform is Hargreaves Lansdown.

noh

In their 2nd post the OP says that the ETF is 3LUS which is
WISDOMTREE S&P 500 3X DAILY LEVERAGED (3LUS)

Chart is here
https://www.hl.co.uk/shares/shares-search-results/b/wisdomtree-s-and-p-500-3x-daily-leveraged/share-charts

The price has varied between £1300 (not 130p) and £950 over the last 3 months.
The OP hasn't stated on which day the sale took place.

dunstonh

Most of us do not go by fund codes and go by fund name.   And where a code is used, it is normally put in capital letters and made a bit clearer.  It is no wonder a bunch of us didn't pick up on the fund name.

Malthusian

debaura12 said:

OK thanks for that. But surely Hargreaves Lansdown should offer some kind of associated warning?

You would have had a generic "capital at risk" warning. Brokers do not give warnings on a level as specific as "this ETF might spike downwards by 22% within hours/minutes" as that would put them well into the realms of financial advice.

Malthusian

3X leveraged? Almost certainly nothing to see here. Although if the OP makes a formal complaint to HL, it won't cost them anything and HL will almost certainly reply to set out full details of when the stop loss triggered and why the market price was where it was at that particular point. If I am wrong and HL made a mistake they will compensate the OP.

Nobody investing in an S&P500 3x Daily Leveraged ETF needs risk warnings. You don't stumble across a share like that while looking for Vanguard LifeStrategy.

Thrugelmir

debaura12 said:

kristina001 said:

The EFTA allows consumers to challenge errors and have them corrected within a 45-day period with limited financial penalties. When errors occur, EFTA outlines requirements for banking institutions and consumers to follow.

OK thanks for that. But surely Hargreaves Lansdown should offer some kind of associated warning?

For what. The stop loss was triggered as the price fell below your prescribed limit. The trade was conducted at the best possible price available at the time. HL made no profit from the transaction. All they collect is the fee for processing the trade. A common misnomer is that an investor will receive the price that they set. This isn't the case. In volatile markets prices can bounce around in seconds. As the big boys with robo trading programmes can buy and sell at will. ETF's aren't for the inexperienced investor. Think of them as rowing a small boat across the Atlantic in storm with no life boat to resue you. Cheap fees aren't the only consideration to be made when investing. 

noh

Malthusian said:

3X leveraged? Almost certainly nothing to see here. Although if the OP makes a formal complaint to HL, it won't cost them anything and HL will almost certainly reply to set out full details of when the stop loss triggered and why the market price was where it was at that particular point. If I am wrong and HL made a mistake they will compensate the OP.

Nobody investing in an S&P500 3x Daily Leveraged ETF needs risk warnings. You don't stumble across a share like that while looking for Vanguard LifeStrategy.

The risk warning is of course present in the KID which presumably the OP read.

https://www.wisdomtree.eu/-/media/eu-media-files/key-documents/kids/kid---wisdomtree-sp-500-3x-daily-leveraged---3usl---en.pdf

jamei305

That ETF is classed as a sophisticated investment meaning that HL shouldn't have let the OP trade in it without first completing their Complex Products Questionnaire.