Mar. 29, 2026
To the Securities and Exchange Commission, I am writing as a private investor to express my frustration with the current regulatory limits on leveraged ETFs, specifically the recent rejections of 5x index and 3x blue-chip ETP filings. The current interpretation of Rule 18f-4 creates a "Regulatory Paradox" that actively harms US retail investors in three specific ways: The Futures Inconsistency: As an investor, I can currently access 5x leverage through the futures market, where my downside is theoretically unlimited and subject to margin calls. However, I am blocked from 5x ETPs where my maximum loss is mathematically capped at 100% of my initial investment. It is inconsistent to label a capped-risk vehicle "too dangerous" while leaving an uncapped-risk vehicle open to the same audience. Forced Capital Flight and Tax Penalties: Because the SEC blocks these products, I am forced to trade LSE-listed ETNs to achieve my desired capital efficiency. This subjects me to significantly higher trading fees and the punitive PFIC (Passive Foreign Investment Company) tax regime. The current US policy does not "protect" me; it exports my capital to foreign exchanges and burdens me with complex Form 8621 reporting. Ignoring Safety Innovations: Modern high-leverage ETPs utilize intraday rebalancing mechanisms that successfully prevent fund "blow-ups" during high volatility—a feature I have personally seen preserve capital during recent market corrections. Proposed Solution: Instead of a blanket prohibition that ignores the math of modern fund structures, I urge the Commission to align with the framework of the INVEST Act (H.R. 3383). I support a "Sophisticated Investor" tier where individuals can pass a standardized competency exam to unlock higher leverage tools at the broker level. American investors deserve the right to prove their competency rather than being restricted by an arbitrary "leverage ceiling" that ignores basic principles of capital efficiency. Sincerely, Brandon C.