I appreciate FINRAs concern regarding complex products. In this case, I think it is entirely inappropriate to place any restrictions them buying these types of products, but warnings would be helpful. I believe this for a number of reasons:
1.Restrictions hurt investors by taking away options. For me in particular, restricting access to purchase these products may ruin 10 years of work and a large amount of my life savings. Furthermore, the #1 rule of investing is to never invest in anything you dont understand. This responsibility is on THE INVESTOR, not FINRA, not agents, not fund managers.
2.Forcing the purchase through an agent is a terrible idea. This adds bureaucracy, expense, and quite frankly I dont trust the agents Ive interviewed which is why I handle my own investing. Ive seem too many cases where these so-called experts have little understanding about the products they are selling. Additionally, I believe strongly that the incentive structure on commissions and fund advertisement fees is a conflict of interest. If this is the case, then FINRAs good intentions would again cause harm and not good.
3.The idea of prerequisite testing could have merit depending on the restriction. If it is used as the basis for whether someone can invest, it is both condescending and harmful. On the other hand, if the providers of the product are forced to offer a voluntary test, it would be quite helpful. It would allow potential purchasers to assess for themselves their understanding and whether they feel comfortable before purchasing.
4.The idea of increased communication, warnings, or examples has merit. If the product is complex, then forcing the fund manager to give illustrations that demonstrate the risks in simple terms would help contribute to investors understanding the product. Warnings would also be beneficial as they alert the purchaser that there is a special level of risk and that they should conduct especially careful due diligence.
Chad Strong Comment On Regulatory Notice 22-08
I appreciate FINRAs concern regarding complex products. In this case, I think it is entirely inappropriate to place any restrictions them buying these types of products, but warnings would be helpful. I believe this for a number of reasons:
1.Restrictions hurt investors by taking away options. For me in particular, restricting access to purchase these products may ruin 10 years of work and a large amount of my life savings. Furthermore, the #1 rule of investing is to never invest in anything you dont understand. This responsibility is on THE INVESTOR, not FINRA, not agents, not fund managers.
2.Forcing the purchase through an agent is a terrible idea. This adds bureaucracy, expense, and quite frankly I dont trust the agents Ive interviewed which is why I handle my own investing. Ive seem too many cases where these so-called experts have little understanding about the products they are selling. Additionally, I believe strongly that the incentive structure on commissions and fund advertisement fees is a conflict of interest. If this is the case, then FINRAs good intentions would again cause harm and not good.
3.The idea of prerequisite testing could have merit depending on the restriction. If it is used as the basis for whether someone can invest, it is both condescending and harmful. On the other hand, if the providers of the product are forced to offer a voluntary test, it would be quite helpful. It would allow potential purchasers to assess for themselves their understanding and whether they feel comfortable before purchasing.
4.The idea of increased communication, warnings, or examples has merit. If the product is complex, then forcing the fund manager to give illustrations that demonstrate the risks in simple terms would help contribute to investors understanding the product. Warnings would also be beneficial as they alert the purchaser that there is a special level of risk and that they should conduct especially careful due diligence.