Gregory Viggiano Comment On Regulatory Notice 22-08
Gregory Viggiano
N/A
To Whom it May Concern: I am writing in opposition to SEC Proposed Rule #S7-24-15 which would place unduly burdensome restrictions on persons wishing to invest in leveraged an inverse funds. This rule would require passing a test, showing high net worth, "cooling off" periods and other impediments that would do nothing to address the risk that regulators perceive in these investments. These proposed regulations would discriminate against investors by ignoring even riskier investments that are publicly available, and make it impossible for investors to manage risk in retirement funds, which otherwise bar the use of margin and shorting. They also represent a radical departure from the manner in which the United States historically has regulated publicly-available securities. They should therfore not be implemented. While leveraged and inverse funds present risks to investors, so do virtually all other forms of investment. Even an investment in US government bonds, long considered the safest investment in the world, can have high risk for an investor buying long term bonds for a short term investment in a declining rate environment. Investors may purchase without special restrictions many other investments that carry higher levels of risk, such as high-yield ("junk") bond funds, emerging markets funds, non-fungible tokens, cryptocurrencies, and foreign exchange. Even stocks of individual companies can carry extreme risk levels when prospects change suddenly. General Electric, long prized for its dividend, lost two-thirds of its value in 2017-2019 when its dividend was cut from 24 cents share to a penny. More dramatically, Citigroup went from $545.10 on June 1, 2007, to $10.30 March 6, 2009 - a 98% drop. Both were "blue-chip," well-respected companies with no restrictions on who in the general public could purchase them. Leveraged and inverse funds are important to my investment strategies, which I develop with the help of my investment advisor. The bulk of my retirement savings are held in tax-deferred accounts which do not allow the use of margin or short selling. With the stock market at record valuation levels, I am extremely concerned about losing a substantial portion of my savings due to a market break. Placing a portion of my retirement account balance with inverse funds is a valuable means for me to reduce risk in this market environment. Similarly, when market values return to a more rational level, I can place part of my retirement investments in leveraged funds to enhance my returns. While leveraged and inverse funds have risks, so does every other form of investment. While they have a higher risk than many types of investments, they certainly have a lower risk than many others, risks that are oftentimes not apparent until after the fact, as the General Electric and Citigroup examples make clear. Given that all investments are risky, regulators should hold fast to the principles that have served us well in the nearly 90 year history of securities regulation in the US - offerors of securities should clearly identify the risks inherent to each security and let each member of the public decide for himself what is appropriate for his personal situation. If it is decided that leveraged and inverse funds present some extra risk, then it might be appropriate to require investors to execute a one-time informed consent in which they acknowledge and accept the risks of these securities. Any more extensive impediments would be unduly burdensome and in conflict with the historical posture of securities regulation in the United States.
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Gregory Viggiano Comment On Regulatory Notice 22-08
To Whom it May Concern: I am writing in opposition to SEC Proposed Rule #S7-24-15 which would place unduly burdensome restrictions on persons wishing to invest in leveraged an inverse funds. This rule would require passing a test, showing high net worth, "cooling off" periods and other impediments that would do nothing to address the risk that regulators perceive in these investments. These proposed regulations would discriminate against investors by ignoring even riskier investments that are publicly available, and make it impossible for investors to manage risk in retirement funds, which otherwise bar the use of margin and shorting. They also represent a radical departure from the manner in which the United States historically has regulated publicly-available securities. They should therfore not be implemented. While leveraged and inverse funds present risks to investors, so do virtually all other forms of investment. Even an investment in US government bonds, long considered the safest investment in the world, can have high risk for an investor buying long term bonds for a short term investment in a declining rate environment. Investors may purchase without special restrictions many other investments that carry higher levels of risk, such as high-yield ("junk") bond funds, emerging markets funds, non-fungible tokens, cryptocurrencies, and foreign exchange. Even stocks of individual companies can carry extreme risk levels when prospects change suddenly. General Electric, long prized for its dividend, lost two-thirds of its value in 2017-2019 when its dividend was cut from 24 cents share to a penny. More dramatically, Citigroup went from $545.10 on June 1, 2007, to $10.30 March 6, 2009 - a 98% drop. Both were "blue-chip," well-respected companies with no restrictions on who in the general public could purchase them. Leveraged and inverse funds are important to my investment strategies, which I develop with the help of my investment advisor. The bulk of my retirement savings are held in tax-deferred accounts which do not allow the use of margin or short selling. With the stock market at record valuation levels, I am extremely concerned about losing a substantial portion of my savings due to a market break. Placing a portion of my retirement account balance with inverse funds is a valuable means for me to reduce risk in this market environment. Similarly, when market values return to a more rational level, I can place part of my retirement investments in leveraged funds to enhance my returns. While leveraged and inverse funds have risks, so does every other form of investment. While they have a higher risk than many types of investments, they certainly have a lower risk than many others, risks that are oftentimes not apparent until after the fact, as the General Electric and Citigroup examples make clear. Given that all investments are risky, regulators should hold fast to the principles that have served us well in the nearly 90 year history of securities regulation in the US - offerors of securities should clearly identify the risks inherent to each security and let each member of the public decide for himself what is appropriate for his personal situation. If it is decided that leveraged and inverse funds present some extra risk, then it might be appropriate to require investors to execute a one-time informed consent in which they acknowledge and accept the risks of these securities. Any more extensive impediments would be unduly burdensome and in conflict with the historical posture of securities regulation in the United States.