While I support education about so-called 'complex' investment products, imposing restrictions on purchasing such products is not the right approach. For many years, financial products have been plagued with excessive 'legalese' -- which is the biggest barrier to investors understanding the products in which they are investing. Even the SEC is guilty of obnoxiously wordy explanations in their investor education guides. One such example is that funds are required to publish performance data for periods of 1, 5, or 10 years (or the life of the fund, if shorter). After mentioning it once or twice, it is NOT necessary or helpful to keep repeating "or the life of the fund, if shorter" throughout the document. If you want to protect investors, make simple explanations of these so-called 'complex' products available in everyday, efficient language -- without all the 'legal' clauses, repeated names, etc. which make reading investor material burdensome. Imposing restrictions on the trade of inverse or leveraged funds will cause more harm than good. People use these funds for all sorts of reasons -- for example, to hedge against a falling market, as we've experienced for the first half of this year. Limiting the number of investors also potentially impairs the liquidity of these investments, which could not only really damage current investors, but limit the ability of future investors to hedge their portfolios or make strategic leveraged investments without resorting to even riskier reliance on margin loans. Please do not impose qualification tests or other restrictions on the trading of these securities in the public market. Do a better job of simplifying investor education material instead.
Jeffrey Kawai Comment On Regulatory Notice 22-08
While I support education about so-called 'complex' investment products, imposing restrictions on purchasing such products is not the right approach. For many years, financial products have been plagued with excessive 'legalese' -- which is the biggest barrier to investors understanding the products in which they are investing. Even the SEC is guilty of obnoxiously wordy explanations in their investor education guides. One such example is that funds are required to publish performance data for periods of 1, 5, or 10 years (or the life of the fund, if shorter). After mentioning it once or twice, it is NOT necessary or helpful to keep repeating "or the life of the fund, if shorter" throughout the document. If you want to protect investors, make simple explanations of these so-called 'complex' products available in everyday, efficient language -- without all the 'legal' clauses, repeated names, etc. which make reading investor material burdensome. Imposing restrictions on the trade of inverse or leveraged funds will cause more harm than good. People use these funds for all sorts of reasons -- for example, to hedge against a falling market, as we've experienced for the first half of this year. Limiting the number of investors also potentially impairs the liquidity of these investments, which could not only really damage current investors, but limit the ability of future investors to hedge their portfolios or make strategic leveraged investments without resorting to even riskier reliance on margin loans. Please do not impose qualification tests or other restrictions on the trading of these securities in the public market. Do a better job of simplifying investor education material instead.