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Volume XII, Number 26

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SEC Chair Gary Gensler Provides Statement on Complex Exchange-Traded Products

On October 4, 2021, SEC Chair Gary Gensler issued a statement announcing that he had directed the SEC staff to review the risks of complex financial products and consider potential rulemaking proposals to address those risks. Specifically, Mr. Gensler focused on leveraged ETFs, which are designed to track a multiple of an underlying index, and inverse ETFs, which are designed to track the opposite of an underlying index, and the particular risks that these products may pose to individual investors.

Mr. Gensler noted that complex ETFs have long been a concern of the SEC, citing recent enforcement actions against financial professionals for recommending that retail investors buy and hold exchange-traded products designed for short-term trading and former SEC Chair Jay Clayton’s stated concerns about the investor protection issues these products can pose. He cautioned that although the listing and trading of complex ETFs may be consistent with the Securities Exchange Act of 1934, as evidenced by the SEC’s October 1, 2021 approval of two ETFs that will provide leveraged and inverse exposure to volatility futures, this does not mean that the products are appropriate for every investor. Mr. Gensler concluded by asserting his belief that rulemaking may provide strengthened investor protection.

Mr. Gensler’s remarks are available here.

© 2022 Vedder PriceNational Law Review, Volume XI, Number 323
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About this Author

John Marten Investment Attorney Vedder Price Law FIrm
Shareholder

John S. Marten, a Shareholder in the Chicago office of Vedder Price, has substantial experience representing clients in the investment management industry.

As a member of the firm’s Investment Services group, Mr. Marten counsels clients on a wide variety of matters involving the application of the federal securities laws to investment companies, investment advisers and broker-dealers. He has significant experience counseling investment company clients with respect to new products and was recently involved in the creation of two mutual funds...

(312) 609 7753
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
Jacob Tiedt,Vedder Price law firm investment services attorney
Shareholder

Jacob C. Tiedt is a Shareholder at Vedder Price and a member of the Investment Services group.

Mr. Tiedt’s practice includes the representation of registered mutual funds, closed-end funds and exchange-traded funds; private funds; investment advisers; and other financial institutions on a broad range of regulatory, governance and compliance matters. Mr. Tiedt regularly counsels clients on matters relating to SEC registration, disclosure and compliance; shareholder solicitation; NYSE, Nasdaq and FINRA regulation; corporate governance; and board administration. Mr....

312-609-7697
John M. Sanders Investment Lawyer Vedder Price
Associate

John M. Sanders is an Associate at Vedder Price and a member of the firm's Investment Services group.

Mr. Sanders focuses on advising clients on mutual funds, private placements, sale transactions and regulatory issues.

While in law school, Mr. Sanders was a judicial extern for the Honorable David J. Novak, U.S. District Court for the Eastern District of Virginia and a law clerk with the Baltimore City State’s Attorney’s Office. He also served as Lead Articles Editor for the William & Mary Law Review.

...
(202) 312 3332
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