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Charles McManus Comment On Regulatory Notice 22-08

Charles McManus
N/A

I am a simple accountant from Long Island, NY. I have been investing in inverse ETF's for 13 years. In 2009 I left a low paying job as a tax auditor for the Pennsylvania Department of Revenue. They cashed out my accrued pension benefits, which were worth $6,500. I deposited this money into a traditional IRA rollover account with a broker in February 2009. I invested 20% of the proceeds in a Proshares leveraged long index structured product and 80% in a Vanguard index fund. I periodically rebalanced my investment to manage the risk and avoid excessive leverage and to account for fluctuations in the value of my positions. today this IRA has a balance of $340,000. I have never deposited any additional funds in the account beyond the initial $6,500. Currently 20% of the balance of the account is invested in structured products (leveraged ETF) and the other 80% is invested in unleveraged common stock and index ETF's, giving me a defined risk that is only about 15% or so greater than the unleveraged risk of the broad stock market. I am not a rocket scientist, but had I invested that $6,500 in an S&P ETF I would have about $50k in my IRA today with dividends reinvested, instead of over $300k using the structured products SVXY, TNA, and UPRO. Structured products have changed my life and have benefitted me and my family extensively over the years, all while enabling me to define my risk in the market in a clear manner. I have used them to hedge investments and, in the case of my IRA, to leverage movement in the market in a responsible and disciplined manner. The liquidity of these investments is one thing that makes them very attractive to people like me. If you limit participation in structured products (a/k/a leveraged ETF's) you will greatly diminish their liquidity and increase the risk to investors of using these products. Additionally you will have eliminated one of the most powerful tools in my portfolio. Regulating these products only widens the competitive moat between Wall Street and Main Street enabling hedge fund managers to protect their clients investments via structured products hedges and to leverage market direction while excluding retail investors from the same opportunities. I emplore you to keep American financial markets the most liquid and transparent markets in the world by NOT enacting these additional structured products regulations. Don't make our financial markets something that only the elites have access to. Keep our markets democratic and fair by giving retail investors unfettered access to structured products, which are defined risk, simpler to use and less leveraged than many other institutional investing mechanisms which retail traders have regular access to (such as shorting stocks (a strategy which has no defined risk), some equity options and futures contracts).