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Class action filed against ProShares UltraShort S&P 500 Fund


Murray, Frank & Sailer has filed a complaint on behalf of all individuals and institutions who purchased shares in the UltraShort S&P 500 Fund offered by ProShares Trust pursuant or traceable to ProShares’s false and misleading registration statement issued in connection with shares of the SDS Fund.

The class is seeking to pursue remedies under Sections 11 and 15 of the Securities Act of 1933.

The complaint filed in the Southern District of New York names ProShares, ProShare Advisors, SEI Investments Distribution, Michael L. Sapir, Louis M. Mayberg, Russell S. Reynolds III, Michael Wachs and Simon D. Collier as defendants.

The SDS Fund is one of ProShares’s UltraShort ETFs, which ProShares claims are designed to go up when markets go down. Specifically, the SDS Fund seeks investment results that correspond to twice the inverse of the daily performance of the S&P 500 Index.

However, although the index gained approximately six per cent from 2 January 2009 through 31 July 2009, the SDS Fund fell approximately 29 per cent during this period, generating much greater losses than ProShares claimed.

The complaint alleges that the defendants violated the Securities Act by failing to disclose that if SDS Fund shares are held for a time period longer than one day, the performance of those shares does not track the performance of the index.

In addition, the complaint alleges that if SDS Fund shares are held for a time period longer than one day, there is a significant likelihood of catastrophic losses.

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