The Texas State Securities Board is ordering William H. Lowell, the president of Lowell & Co., to pay a $40K fine after he allegedly failed to properly supervise one of his firm’s ex- financial representatives. The formerly registered broker and investment advisor, Jody Bryant Bowers, allegedly lost nearly all of the assets in two client accounts after holding onto an exchange traded fund (ETF) for too long.
According to the state’s disciplinary order, Bowers bought and sold Proshares Ultra VIX Short-Term Futures ETF (UXVY) shares, which she “exclusively” traded in in the accounts of certain clients. This type of fund makes money through S&P 500 Index volatility, benefiting when there is a drop in the index.
Because the UXVY ETF is a leveraged exchange-traded fund that is a high-risk and costly investment, it is intended for short-term trading and must be monitored every day. However, Bower allegedly disregarded the warnings that were in the ETF’s prospectus and proceeded to hold on to positions in UVXY in two client accounts for too long, including 11,000 shares in one client’s account that were held there for 987 days. This caused the loss of 93% of that client’s initial investment. Bower also allegedly held on to 2,000 UXVY shares in another client’s account for 356 days, causing a 93% loss on the initial investment.