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The litigation has begun. In this case it is the Proshares' "Ultrashort Real Estate Proshares Fund". If I am not mistaken, this problem is prominent in the financial funds as well.

FOR IMMEDIATE RELEASE: Thursday, August 6, 2009 

Labaton Sucharow LLP Files Class Action Lawsuit Against Proshares' Ultrashort Real Estate Proshares Fund

Labaton Sucharow LLP filed a class action lawsuit on August 5, 2009 in the United States District Court for the Southern District of New York, on behalf of all persons who purchased or otherwise acquired shares in the UltraShort Real Estate ProShares fund (the "SRS Fund"), an exchange-traded fund ("ETF") offered by ProShares Trust ("ProShares"), pursuant or traceable to ProShares' false and misleading Registration Statement, Prospectuses, and Statements of Additional Information (collectively, the "Registration Statement") issued in connection with the SRS Fund's shares (the "Class").  The Class is seeking to pursue remedies under Sections 11 and 15 of the Securities Act of 1933 (the "Securities Act").


If you bought shares in the SRS Fund pursuant to the Registration Statement and would like to consider serving as lead plaintiff or have any questions about the lawsuit, please contact Stefanie J. Sundel, Esq. of Labaton Sucharow, at 800-321-0476 or (212) 907-0700, or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..  Lead Plaintiff motion papers must be filed with the United States District Court for the Southern District of New York no later than October 5, 2009.  A Lead Plaintiff is a court-appointed representative for absent class members. You do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action.  If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member. You may retain counsel of your choice to represent you in this action.

If you are a member of this class you can view a copy of the complaint and join this class action online at

The complaint names ProShares; ProShare Advisors LLC, SEI Investments Distribution Co., Michael L. Sapir, Louis M. Mayberg, Russell S. Reynolds, III, Michael Wachs, and Simon D. Collier, as defendants (collectively, "Defendants").  ProShares sells its Ultra and UltraShort ETFs as "simple" directional plays.  As marketed by ProShares, Ultra ETFs are designed to go up when markets go up; UltraShort ETFs are designed to go up when markets go down.  The SRS Fund is one of ProShares' UltraShort ETFs. The SRS Fund seeks investment results that correspond to twice the inverse (-200%) daily performance of the Dow Jones U.S. Real Estate Index ("DJREI"), which measures the performance of the real estate sector of the U.S. equity market.  Accordingly, the SRS Fund is supposed to deliver double the inverse return of the DJREI, which fell approximately 39.2 percent from January 2, 2008 through December 17, 2008, ostensibly creating a profit for investors who anticipated a decline in the U.S. real estate market.  In other words, the SRS Fund should have appreciated by 78.4 percent during this period.  However, the SRS Fund actually fell approximately 48.2 percent during this period-the antithesis of a directional play.

The complaint alleges the Defendants violated the Securities Act by failing to disclose that the SRS Fund is altogether defective as a directional investment play.  Defendants failed to disclose the following risks in the Registration Statement: (1) inverse correlation between the SRS Fund and the DJREI over time would only happen in the rarest of circumstances, and inadvertently if at all; (2) the extent to which performance of the SRS Fund would inevitably diverge from the performance of the DJREI-i.e., the probability, if not certainty, of spectacular tracking error; (3) the severe consequences of high market volatility on the SRS Fund's investment objective and performance; (4) the severe consequences of inherent path dependency in periods of high market volatility on the SRS Fund's performance; (5) the role the SRS Fund plays in increasing market volatility, particularly in the last hour of trading; (6) the consequences of the SRS Fund's daily hedge adjustment always going in the same direction as the movement of the underlying index, notwithstanding that it is an inverse leveraged ETF; (7) the SRS Fund causes dislocations in the stock market; (8) the SRS Fund offers a seemingly straightforward way to obtain desired exposure, but such exposure is not attainable through the SRS Fund.

Plaintiff is represented by the law firm Labaton Sucharow LLP.  Labaton Sucharow is one of the country's premier national law firms that represent institutional and individual investors in class action, complex securities and corporate governance litigation.  The firm has been a champion of investor rights for over 40 years and has been recognized for its reputation for excellence by the courts.  More information about Labaton Sucharow is available at