Mar. 24, 2020
Dear SEC Board: I am writing you today as an active money manager and owner of an RIA firm who opposes the regulations proposed by the SEC regarding the use and sale of leveraged and inverse funds under Release No. 34-87607. My firm, Shadowridge Asset Management, LLC is a State Registered Investment Advisor with over 400 retail investor clients spread across the United States. Our typical clients are school teachers, college professors, young professionals, retired couples, and other “Main Street” average investor clients. Our firm’s Assets Under Management as of 12/31/19 are approximately $52 million. We have used leveraged and inverse funds for our clients since we started our firm in 2012. Part of the reason I created my RIA was to benefit the client and mitigate risk in client portfolios, something I was unable to accomplish effectively at my prior firm. Being able to utilize leveraged and/or inverse funds in client portfolios has allowed us to respond quickly to market volatility and make timely changes. This permits us to add a level of protection to client portfolios which is difficult to achieve otherwise. We do not use these tools with every client nor do we use them long-term. In unusual market conditions, we can employ leveraged and/or inverse funds across multiple client portfolios to add value to multiple households. We also monitor these tools and all our portfolios continually. This helps us to manage portfolio risk and helps to keep clients calm and confident in their investing strategy. The vagueness of the new rule would potentially cause confusion as to how to execute a subjective decision of adequate client knowledge. Who is responsible for that decision and on what basis is the decision supposed to be made? Even if these questions are answered, the new rule would potentially require additional compliance oversight as well as additional training for our staff and advisors, taking them away from their primary duties of client care. The SEC website states you “inform and protect investors.” We honor and carry out that work as we interact with our clients every day. The new proposed rules would hinder our ability to work towards that mutual goal. The proposed rule will not serve to protect unsophisticated investors. Rather, it will have the opposite effect: to potentially expose more retail clients to market risk that could have been addressed by a knowledgeable asset manager with access to all appropriate tools. It is a proposal that is better abandoned in favor of more thoughtful legislation. Ryan C. Redfern, ChFC President / Chief Investment Officer Cell: 512-689-5512 | Office: 888-434-1427 | Fax: 512-524-9101 1001 S. Capital of Texas Hwy, M-100, Austin, Texas 78746 www.shadowridgeinvest.com Investment advisory services are offered through Shadowridge Asset Management, LLC, a Texas Registered Investment Advisor. Shadowridge Asset Management's outgoing and incoming e-mails are electronically archived and subject to review and/or disclosure to someone other than the recipient. We cannot accept requests for securities transactions or other similar instructions through e-mail. We cannot ensure the security of information e-mailed over the Internet, so you should be careful when transmitting confidential information such as account numbers and security holdings. If the reader of this message is not the intended recipient, or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to this message and deleting it from your computer.