Leveraged and inverse ETFs are designed to reach their objectives by resetting daily so their performance can quickly diverge from the performance of the underlying index or benchmark.

“It is possible that investors could suffer significant losses even if the long-term performance of the index showed a gain. This effect can be magnified in volatile markets,” FINRA said in a statement last week.

JP Turner “failed to establish and maintain a reasonable supervisory system” and “supervised leveraged and inverse ETFs in the same manner that it supervised traditional ETFs,” the authority added.

According to the statement, JP Turner also failed to provide adequate training regarding the ETFs, while allowing registered representatives to recommend them without fully understanding the products.

The 84 clients include 27 who collectively lost more than $200,000 by holding leveraged and inverse ETFs for several months, while 66 paid commissions and sales charges of some $500,000 in unsuitable mutual fund switches.

“Mutual fund shares are typically suitable as long-term investments and are not proper vehicles for short-term trading because of the transaction fees and commissions incurred from repeated buying and selling of mutual fund shares,” FINRA said. “JP Turner failed to establish and maintain a reasonable supervisory system designed to prevent unsuitable mutual fund switching and lacked sufficient procedures to adequately monitor for trends or patterns involving mutual fund switches.”

JP Turner consented to the entry of FINRA's findings, but neither admitted nor denied the charges.