Leveraged/Inverse Products Acknowledgment

There are special characteristics and risks associated with trading in leveraged, inverse, and leveraged inverse products (certain exchange-traded funds and exchange-traded notes) (collectively, “Leveraged/Inverse ETPs”). In transacting in such products, including on any E*TRADE from Morgan Stanley (“E*TRADE”) trading platform and mobile application, you acknowledge that you understand the risks of trading Leveraged/Inverse ETPs, including those described herein and in the offering documents for the products, and you agree to the terms and conditions provided in this Acknowledgment.

1. Risks Associated with Leveraged/Inverse ETPs

Investing in Leveraged/Inverse ETPs involves heightened risks and may not be appropriate for most investors. Leveraged/Inverse ETPs are complex products that present unique and significant risks, especially during times of market volatility. See https://us.etrade.com/l/f/disclosure-library/inverse-leveraged-etfs for more information. Exchange-traded notes present additional and distinct risks from exchange-traded funds. See https://us.etrade.com/l/f/disclosure-library/exchange-traded-notes for more information. Leveraged/Inverse ETPs are intended for experienced and aggressive investors who are able to manage their investments on a daily basis and understand the risks of such investments.

  • Holding Risks. Please keep in mind that Leveraged/Inverse ETPs typically seek to achieve their investment objectives on a daily basis (i.e., over one trading session). When held for longer than one day, the performance of Leveraged/Inverse ETPs can differ significantly from the performance (or the inverse of the performance) of their underlying index, benchmark or single-security over the same time period. This effect can compound the longer the product is held and result in large and unexpected losses, particularly in volatile markets.
  • Volatility Risk. Leveraged/Inverse ETPs also amplify the volatility and related risk associated with a fund’s underlying index, benchmark or single-security. Volatility refers to the frequency and magnitude of changes in the prices of a financial instrument. Generally, the higher the volatility of an instrument, the greater its price swings and the more risk associated with it. The increased volatility associated with Leveraged/Inverse ETPs is especially pronounced with respect to funds that provide exposure to a single-security, which by their nature, are not diversified.
  • Liquidity Risk. Liquidity refers to the ability of market participants to buy and sell securities at a competitive price. Greater volatility in Leveraged/Inverse ETPs may lead to market dislocations and higher probability that Leveraged/Inverse ETPs may be restricted from trading or be liquidated. As a result, there may be lower liquidity involving Leveraged/Inverse ETPs, which may result in an investor not being able to sell a LIETF or having to accept a discounted price to do so. This is especially the case for exchange-traded notes, which, as noted above, present additional and distinct risks.
  • Unknown risks. You understand that Morgan Stanley Smith Barney LLC (the “Company") may not be able to predict and describe all the special trading risks that could arise with trading in these products. Therefore, you agree not to hold the Company, its affiliates, and their employees responsible for any risks you undertake, regardless of whether described herein or in the products’ offering documents, by transacting in such products.

2. Account Holder/Authorized Agent Acknowledgment

By choosing to transact in Leveraged/Inverse ETPs, you understand and acknowledge the following.

i. You have reviewed the product’s offering documents.

ii. You understand the risks of the product, including the potential loss of the entire amount invested; are acting as a self-directed investor; and, accordingly, are capable of making your own investment decisions.

iii. Although the Company identifies these investments on its web and mobile platforms and provides certain education about them, it does not provide any investment advice or make any recommendations regarding Leveraged/Inverse ETPs. As such, you have not relied, nor will you rely, on the Company or its representatives for any information or guidance in determining the appropriateness of the product for your account.

iv. This Acknowledgment applies to all purchases of these products for all accounts, and failure to provide this Acknowledgment may result in your being prohibited from purchasing the products.