February 19, 2020
This proposal is bad for investors. If the proposal is adopted, I could lose the benefit from the enhanced return and portfolio protection potential of leveraged and inverse funds. I could potentially be prevented from buying leveraged and inverse funds by an overly burdensome qualification process. Brokerage funds could stop offering these funds altogether due to the difficulty of implementing the regulations.
The proposed rule is unnecessary. The SEC has not shown there is a problem that needs to be solved with respect to leveraged and inverse funds. The SEC fails to show why these funds should be treated differently than tens of thousands of other public securities, each with their own characteristics and risks.
The proposal sets a dangerous precedent. Requiring investors to qualify to purchase a security in the public markets would be an unjustified break with how the SEC's regulation of the sale of securities in the public markets has worked for the better part of 100 years. The proposal would be at odds with the SEC's long-standing system that gives investors and their advisors the freedom to make their own investment decisions.