Barry Fitzgerald Comment On Regulatory Notice 22-08
Barry Fitzgerald
N/A
To further restrict access to complex products would be a mistake. Demanding that brokerages and fiduciaries provide education on how these products work makes sense, but restriction earlier in my investing career actually cost me money. I currently use ETFs, leveraged instruments, and options to limit my risk.
Before starting, I spent hours and hours on educational sites, watching videos, and learning about options and leverage strategy. There are a ton of resources out there and many of them are very, very good at explaining the risks and strategies involved with playing complex financial instruments.
Even with hundreds of hours of self-guided education, I still had to lose some money playing with leveraged instruments to understand them. Loss is part of the process of learning to play riskier assets. If you don't experience losses, you won't develop the proper emotional discipline to learn when you should/should not play them. For many people, paper trading and education accounts aren't enough... and to limit the options of investors arbitrarily (which is essentially how most brokerages operate right now) harms retail investors.
Some of the examples should be policed, but not at the expense of retail investors. The problem largely lies with failure to execute fiduciary responsibility in guidance to investors, not in the complex products available to investors.
Rules like options restrictions and PDT (Pattern Day Trade) result in limiting retail investors' ability to respond to changing market conditions, while locking them in potentially bad trades without the ability to exit. Further, these restrictions absolutely and obviously DO NOT WORK to limit the damage of risky behavior, since holding a trade overnight or not having access to certain instruments does not, in any way, limit access to risky plays. Nor does either restriction create any form of real world pressure to invest long term.
Fundamentally, these restrictions, as far as I can tell (and I have a background in macroeconomics and bank regulation) only result in restricting retail investors and advantaging those with more money in the market. The SEC should be heading in the opposite direction: Exposing more retail investors with limited funds to MORE complex products and FEWER restrictions, while at the same time promoting the adoption of LOWER RISK investment products through expanded access.
Further limiting retail is further empowering moneyed interests in the market, and that is the exact opposite of what FINRA and the SEC should be engaged in. We need MORE financial freedom and options, not limitations for the lower and middle class while the wealthy engage in any practice they want.
Barry Fitzgerald Comment On Regulatory Notice 22-08
To further restrict access to complex products would be a mistake. Demanding that brokerages and fiduciaries provide education on how these products work makes sense, but restriction earlier in my investing career actually cost me money. I currently use ETFs, leveraged instruments, and options to limit my risk.
Before starting, I spent hours and hours on educational sites, watching videos, and learning about options and leverage strategy. There are a ton of resources out there and many of them are very, very good at explaining the risks and strategies involved with playing complex financial instruments.
Even with hundreds of hours of self-guided education, I still had to lose some money playing with leveraged instruments to understand them. Loss is part of the process of learning to play riskier assets. If you don't experience losses, you won't develop the proper emotional discipline to learn when you should/should not play them. For many people, paper trading and education accounts aren't enough... and to limit the options of investors arbitrarily (which is essentially how most brokerages operate right now) harms retail investors.
Some of the examples should be policed, but not at the expense of retail investors. The problem largely lies with failure to execute fiduciary responsibility in guidance to investors, not in the complex products available to investors.
Rules like options restrictions and PDT (Pattern Day Trade) result in limiting retail investors' ability to respond to changing market conditions, while locking them in potentially bad trades without the ability to exit. Further, these restrictions absolutely and obviously DO NOT WORK to limit the damage of risky behavior, since holding a trade overnight or not having access to certain instruments does not, in any way, limit access to risky plays. Nor does either restriction create any form of real world pressure to invest long term.
Fundamentally, these restrictions, as far as I can tell (and I have a background in macroeconomics and bank regulation) only result in restricting retail investors and advantaging those with more money in the market. The SEC should be heading in the opposite direction: Exposing more retail investors with limited funds to MORE complex products and FEWER restrictions, while at the same time promoting the adoption of LOWER RISK investment products through expanded access.
Further limiting retail is further empowering moneyed interests in the market, and that is the exact opposite of what FINRA and the SEC should be engaged in. We need MORE financial freedom and options, not limitations for the lower and middle class while the wealthy engage in any practice they want.