ARTICLE
3 November 2021

Chair Gensler's Statement On Exchange-Traded Products

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Over the years, there have been many SEC and FINRA statements warning of issues relating to sales of inverse, leveraged exchange traded notes and exchange traded funds (together, "ETPs") to retail investors.
United States Finance and Banking

Over the years, there have been many SEC and FINRA statements warning of issues relating to sales of inverse, leveraged exchange traded notes and exchange traded funds (together, "ETPs") to retail investors. In 2015, the SEC issued a request for comment on ETPs, but took no subsequent action.

On October 4, 2021, SEC Chair Gary Gensler directed the SEC Staff to study the potential risk of complex ETPs and to present recommendations for potential rule making proposals to address those risks. Chair Gensler referenced the various SEC and FINRA warnings about leveraged and inverse ETPs, and also noted that even sophisticated investors are potentially at risk. He also stated that simply because these products meet the NYSE listing standards, it does not mean that they are right for all investors.

It seems like rules governing ETPs are on the horizon. Chair Gensler said, in his statement, "I believe that potential rulemaking could strengthen the investor protections around these products."1

Footnote

1. Chair Gensler's statement is available at: SEC.gov | Statement on Complex Exchange-Traded Products.


Originally published in REVERSEinquiries: Volume 4, Issue 5.
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