March 10, 2020
To whom it may concern,
Let me start by saying that I am against the proposed changes listed in SEC Release No. 34-87607 that would require brokerage firms to evaluate an investors ability to handle the perceived extra risk involved with leveraged and inverse funds. I strongly believe that the brokerage firm (Fidelity) that I utilize to purchase leverage and inverse funds, LI, already does a more than sufficient job of explaining all of the risks involved with LI fund purchases, and that it is my responsibility to understand these risks prior to making any investment choice. Every prospectus clearly states the risks and that this form of trading is meant to be utilized by experienced traders that can handle and tolerate a loss up to an including a complete loss of principle. The prospectus clearly highlights the use of derivatives along with all of the unique types of risk that is involved with using LI funds. I believe that forcing the brokerage firms to individually evaluate a potential investors means of tolerating these risks is an unprecedented and overly restrictive burden on the investment firms. This regulation will only serve to remove LI funds from the market, which would be an extreme disservice to the investment community.
When properly used, LI funds can serve as a phenomenal form of protection against market conditions. I believe these LI funds are easier and indeed a safer form of protection that one can get from options and margin trading. I have personally used these funds to lower my trading volatility while at the same time increasing my returns and avoided losses.
It is my belief that the proposed changes to SEC Release No. 34-87607 is a fundamental change from the correct and historic guiding principles that individual investors are capable of making their own investment choices. The proposed changes that would require the brokerage firms to evaluate an individuals tolerance for risk, and ability to make his/her own investment choice is an overreaching and unprecedented departure from how the SEC regulates other investment options and must not be allowed to proceed. Please continue to trust the individuals right to allocate their investments and do not take away such a valuable investment tool.
Sincerely,
Sean Hamilton