Wednesday, March 2, 2016

Misunderstood ETFs are Getting New SEC Rules

With the enormous growth of ETFs, which now hold over 2 trillion dollars in investors' funds, the SEC is considering new rules to regulate the use of this investment.

Exchange-traded funds may be so complex and volatile that they require a distinct set of rules from equities, SEC Commissioner Kara Stein suggested Friday. In remarks at the annual SEC Speaks conference, Stein acknowledged that ETFs have been a boon for many investors. Still, the average retail client doesn't understand the risks they carry and the features that distinguish them from common stock and mutual funds, she says.

Stein is calling for the SEC to convene working groups to take a hard look at the specific types of products that are available in the exchange-traded model. She is urging the commission to coordinate with FINRA and other regulators to evaluate how those products are being marketed, and to determine whether ETFs can even be considered suitable for buy-and-hold investors.

Are New Rules Needed for ETFs?
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