Mar. 24, 2020
Dear SEC, I wish to comment on the proposed rule on the use of Derivatives by Registered Investment Companies etc. I am in support of the SEC addressing investor protection and regulating the use of derivatives and leverage in ETFs. Your request for comments included a request for data. In discussions of this proposed rule, I read of people doubting that potential investors needed to have the risks of an ETF, or a leveraged ETF explained to them. There was pushback to say this was not necessary. I provide data in the following chart. I asked 50 of my closest friends to respond, without looking up the answer or asking anyone, "What is an ETF (Exchange Traded Fund)? As you can see by the chart below including their answers along with my rough knowledge of their backgrounds, I did not ask 50 average people. I am blessed to know world travelers and educated, accomplished people. Most or all of these are people who invest for their futures. To my amazement, 25 of the 50 answered within 24 hours. Eight respondents had no idea and did not wish to hazard a guess. Four responded with assurance, and the remaining thirteen responded with guesses. Of all seventeen who gave an answer, many gave reasonable sounding answers. Not one recognized any special risk involved in ETFs or considered any nuance regarding the use of derivatives or leverage. If there was any discussion of risk it was that they were low-risk and similar to mutual funds. They are similar but they are not the same. ETFs have additional risks that are not readily apparent. I believe these funds require more caution than is currently given and applaud the SEC moving in that direction. respondent # Education Level Career Path Response to the question: What is an ETF (Exchange Traded Fund) 1 not sure Warehouse Manager / logistics Not totally sure but I want to say it's a mutual fund that's traded on the stock exchange 2 post-college, accounting CPA I am investmentally impaired, I don't know what an ETF is. 3 PhD business from European University, fluent in at least two languages work in a business university an ETF is like a stock that you can buy and sell, but instead of being for one company, it is for a bucket of companies and the bucket of companies is made up to match a specific group of companies (those that make up the S&P500, those that make up international indexes). 4 college graduate, other training, fluent at least two languages software developer, principle in business I don't know 5 college, Master's Finance underwriter of investments that are packaged into funds for private sale to sophisticated investors. It's like a mutual fund, I know a couple of attributes, such as it's a way to diversify, and trades are executed right away, rather than at the end of trading, and something I can't remember about taxes, but I can't define it in a sentence 6 not sure software developer, writes software that creates prototypes for industry I think it is any fund such as a mutual fund or index fund that is traded on a stock exchange. I can’t say I know that for sure though. 7 Master's Education special education teacher, founded a successful nonprofit My guess is that it is a stock which is traded on the stock exchange on Wall Street. (spouse) handles our financial investments and I am glad about that but I'm somewhat embarrassed that I don't know this. 8 at least college graduate supervisor of managers at Government agency, started at least two successful businesses in retirement I don't have a good answer for you 9 PhD education Teacher of teachers at major university I have no idea 10 college (science) plus other training, somewhat multi-lingual (speaks 4 languages, but not fluently) int'l executive of quality control, consultant in medical industry I have no idea. My guess is a fund that is bot traded on the new york stock exchange 11 not sure scuba diver, office manager I really don't know 12 college, MBA, fluent in at least two languages marketing and branding executive I feel like I should know this because I’m working with a financial planner, we save and invest at a high rate and we have talked about ETF lately. But honestly I don’t confidently know. My best guess would be like a mutual fund or some sort of portfolio fund that mimics the S&P or Dow. I know I asked my advisor within the past month what an ETF is, and he explained it but honestly I don’t really remember. It’s not something I think about or use in conversation a lot. Basically I’m pretty well educated on finances, I have an MBA, actively engage in my 401k, IRAs, HSA and other tax advantaged savings. But I couldn’t describe ETF without looking it up. couldn’t tell you what it stands for if you hadn’t said. 13 not sure Sorry, I am just not a financial person, so I could make a guess at what that is, but I could not tell you with certainty. 14 dental school, also law degree fluent in at least two languages was dentist, tried being a lawyer, went back to dentistry - less depressing I don't speak mandarin, lol 15 at least college graduate, fluent in 4 languages successful inventor, manager at large medical company, after retired, lived by day trading, then owned chain of stores, part owner int'l mfr/distributor based on something he invented ETFs are collections of equities or bonds that trade as an equity and whose price/value is determined by the prices of the underlying issues. This is a great way to step into today’s market chaos without having to choose among individual beaten down stocks. Not yet, but soon I will start to pick up SPY. 16 Undergraduate Economics, MBA Economist, manager of economists, in economic development and housing industry I am not a student of the SEC. Exchange Traded Fund may have made it into a textbook chapter I read many, many moons ago. I do not recall it. My Final Jeopardy guess would be a fund that is only traded within a particular exchange. I hope I did not wager a huge amount because the SEC's way of naming things is not always clear to me 17 MBA in Finance, and CPA CPA, audits small companies, not mom and pop, just not publicly traded I have a MBA in Finance and hold a CPA license, but other than knowing that it is a fund that trades like a stock ---I know nothing about ETFs. 18 PhD science, fluent reader of scientific studies in 3 languages, and can communicate in them verbally as well. Manager of research of national importance, engages in international science collaboration An ETF is a collection of similar stock equities, similar to a low-fee mutual fund/ index fund. An ETF can be bought and sold at any time during the day, like individual stocks, unlike mutual funds that are only priced at the end of each day. 19 some college, education former manager of retail stores, regional manager of chains of retail stores I do not know 20 college, dental school, physician's assistant school dentist, sole practice so ran company many years. I believe that it is a version of a stock mutual fund which trades throughout the day rather than at the close of day. 21 college, some time in law school social services program administrator for government agency If I had to guess, I would say it is some type of money market fund whose rate of return varies with the Dow or S&P but I honestly have no clue! 22 at least college graduate, probably masters university librarian I haven't heard of this term before. It sounds like a stock that's traded on the stock exchange. 23 college, CPA CPA, auditor large multinational companies. group of stocks put together through an exchange…sort of like a mutual fund 24 college, Master's, software development training Head of an organization of librarians Off the top of my head, I can report that an Exchange Traded Fund is an investment vehicle similar to a mutual fund, with the special property that shares in the fund may be bought and sold on stock exchanges, like stock. Thus it becomes a more liquid version of an investment fund. 25 college nurse I don’t know for sure what an ETF is, but my SWAG ( scientific wildassed guess) would be that it is one of the funds that is traded directly on the exchange floor, maybe instead or in addition to by other means. I have other concerns but for now, wish to concur that better explanation is needed in this sector that has become such a large part of all investing. Cynthia G.H. King