February 18, 2020
I am an individual, non-professional investor writing to oppose your proposal to restrict access to leveraged and inverse funds.
Investing in these funds is not qualitatively riskier than investing in stocks. One can just as easily take on risk by taking an outsized position in an individual stock.
Next, unrestricted access to these funds allows an individual investor with limited means to hedge against investment risk, without needing significant sums to invest in a hedge fund. It is quite undemocratic and patronizing to restrict inverse or leveraged funds to those who exceed a determined financial level, or to impose additional requirements to access such funds compared to traditional investments. In addition, unrestricted access to these funds likely protects investors from neglect of traditional investment risk and from market overexuberance.
Finally, the SEC should not take on the role of protecting investors from legitimate risk, as this will likely distort market conditions by favoring certain types of investment over others. Such an approach inadvertently increases risk in other areas, ultimately leading to further efforts to restrict risk.