NEW YORK (TheStreet) -- On Thursday Finra (the Financial Industry Regulatory Authority) announced it had ordered two broker-dealers, Stifel, Nicolaus (SF) and Century Securities, to pay fines and make restitution payments related to the sale by their brokers of leveraged and inverse exchange-traded funds.

Finra's disciplinary actions, as chronicled on the Web site Zero Hedge, raised issues about the suitability of broker recommendations of certain "non-traditional" ETFs, as well as the adequacy of existing supervisory systems and written procedures related to the sale of those products.

In its settlement with Finra, Stifel, which "neither admitted nor denied the charges," agreed to pay a fine of $450,000, and to provide restitution for several hundred thousand dollars of customers' losses.

In a June 2013 blog post, I had chronicled my concern that certain types of alternative ETFs, particularly inverse and leveraged exchange-traded products, might entail risks that aren't fully appreciated by many investors. I wasn't alone in expressing doubts about investors' familiarity with, and understanding of, the daily reset characteristics of inverse ETFs. 

As noted by Finra, "leveraged and inverse ETFs 'reset' daily, meaning that they are designed to achieve their stated objectives on a daily basis 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."

Given the unique features of these exchange-traded products, it's easy to understand how individuals might make ill-advised investments in alternative ETFs, even in the absence of any nefarious intent on the part of the brokers who sell them. Finra observed that "customers with conservative investment objectives who bought...non-traditional ETFs...and who held those investments for longer periods of time, experienced net losses."

In the past, Finra has issued Investor Alerts and news releases, directed to buy-and-hold investors, about the pitfalls of investing in leveraged and inverse ETF's. One of those Investor Alerts dates back to August 2009. Reading the Finra announcement, one gets a sense that Finra's settlement with Stifel and Century won't be the last regulatory action related to inverse and leveraged ETFs.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.