Mar. 25, 2020
Comment on SEC Proposed Rule #S7-24-15: To Whom It May Concern: The proposed regulations contained in SEC Release No. 34-87607 (“Release”), promotes the belief that investors cannot be trusted to understand clearly disclosed risks is an unprecedented, alarming and notable departure from the bedrock principles of the capital markets and of how the SEC regulates the offering of other securities. I do not want financial institutions to have the right to decide whether I am sufficiently “capable” to assess risk, or to disqualify me from trading L&I Funds or any other publicly offered investment unless I specifically agree to it. As a longtime investor I understand the characteristics and risks of L&I Funds. Leveraged and Inverse ETPs entail unique risks and are intended for sophisticated investors. They are not designed for investors who seek to track an index over a long period of time. An inverse ETP attempts to mimic the opposite of the performance of its stated benchmark. A leveraged ETP seeks to generate a return that is a multiple of its benchmark index's performance. Both seek results over a pre-set time period indicated in the prospectus or offering circular. That time period is often one day. As a result, their returns can differ significantly, both positively and negatively, from that of their benchmark index, especially over investment periods lasting longer than one day. Investors should, therefore, monitor their holdings consistent with their strategies, as frequently as daily. Exchange traded products (ETPs) are subject to market volatility and the risks of their underlying securities which may include the risks associated with investing in smaller companies, foreign securities, commodities and fixed income investments. Foreign securities are subject to interest-rate, currency-exchange-rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector are generally subject to greater market volatility as well as the specific risks associated with that sector, region or other focus. ETPs which use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses and tracking error. An ETP may trade at a premium or discount to its Net Asset Value (NAV) (or Indicative Value in the case of ETNs). Each ETP has a unique risk profile which is detailed in its prospectus, offering circular or similar material, which should be considered carefully when making investment decisions. I am an active investor and am constantly monitoring my brokerage account and the market, and because of these risks I monitor my investment in these funds daily. My brokerage (E*Trade) has sufficient and multiple warnings on the use of these investment vehicles. I hope that under the proposed regulations they would automatically qualify me to continue trading L&I Funds.