Please see below for comments in response to Regulatory Notice 22-08. Thank you for the opportunity to provide feedback. Definition of complex should be objective- if use of derivatives is a criterion it should be applied to all funds that do so. This suggests that more useful criteria would focus on factors like maximum risk of loss, risk of the fund not being able to meet its stated objectives, and systemic risks specifically related to the product, such as investors' inability to meet margin calls. Self-directed investors- The examples of failures in the notice are largely related to financial advisors and brokers. There should not be regulations that restrict investment choices that would be otherwise permitted through a financial advisor. The risk of loss is not absent with "conventional" investments as well, and measures of risk need to be objective. Restricting choices can also result in an increase of risks as it could force investors into choosing from limited product offerings that all experience nominal or real losses. Disclosure is a more consistent means of regulating investment products for self-directed investors. Investor gatekeeping- Account criteria based on representations of experience or assets are not necessarily consistently applied across brokerage firms. Any acceptance criteria should be stated objectively, and available in advance of customers submitting an application. If the goal is investor protection, limiting advertising, or if needed a simple test-based approach would be fairer and reduce the potential for "shopping" for a broker with the most lax criteria. Any criteria adopted should be applied to conventional products as well, so as not to give a perception that they are free of risks or somehow are protected since the application is permitted to be easier. If the goal is protection from systemic risks related to a broker, reliance on broker-selected criteria is likely insufficient. Product-specific requirements- One area where oversight is needed is ensuring that members platforms are consistent with the stated objectives and procedures for the product. For example, on a major broker's online platform, daily objective funds are restricted from being sold the next day which is inconsistent with the fund objectives. Brokers must adequately support customers' ability to manage investments in a timely fashion not just on initial purchase. Forcing customers to wait on a call-queue is unacceptable when online capabilities should exist. Also, if products might not able to meet their stated objectives under certain market conditions, that would be a more valuable area for review and scrutiny.
Anonymous Comment On Regulatory Notice 22-08
Please see below for comments in response to Regulatory Notice 22-08. Thank you for the opportunity to provide feedback. Definition of complex should be objective- if use of derivatives is a criterion it should be applied to all funds that do so. This suggests that more useful criteria would focus on factors like maximum risk of loss, risk of the fund not being able to meet its stated objectives, and systemic risks specifically related to the product, such as investors' inability to meet margin calls. Self-directed investors- The examples of failures in the notice are largely related to financial advisors and brokers. There should not be regulations that restrict investment choices that would be otherwise permitted through a financial advisor. The risk of loss is not absent with "conventional" investments as well, and measures of risk need to be objective. Restricting choices can also result in an increase of risks as it could force investors into choosing from limited product offerings that all experience nominal or real losses. Disclosure is a more consistent means of regulating investment products for self-directed investors. Investor gatekeeping- Account criteria based on representations of experience or assets are not necessarily consistently applied across brokerage firms. Any acceptance criteria should be stated objectively, and available in advance of customers submitting an application. If the goal is investor protection, limiting advertising, or if needed a simple test-based approach would be fairer and reduce the potential for "shopping" for a broker with the most lax criteria. Any criteria adopted should be applied to conventional products as well, so as not to give a perception that they are free of risks or somehow are protected since the application is permitted to be easier. If the goal is protection from systemic risks related to a broker, reliance on broker-selected criteria is likely insufficient. Product-specific requirements- One area where oversight is needed is ensuring that members platforms are consistent with the stated objectives and procedures for the product. For example, on a major broker's online platform, daily objective funds are restricted from being sold the next day which is inconsistent with the fund objectives. Brokers must adequately support customers' ability to manage investments in a timely fashion not just on initial purchase. Forcing customers to wait on a call-queue is unacceptable when online capabilities should exist. Also, if products might not able to meet their stated objectives under certain market conditions, that would be a more valuable area for review and scrutiny.