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.
Click here to read the articles in this latest edition.
Visit us at mayerbrown.com
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2020. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.