I do not believe testing investors' knowledge of complex products as a prerequisite to their purchase is an effective way to protect those investors. Test answers could be obtained from the internet without the investor actually retaining the knowledge effectively. Additionally, a lack of understanding of a particular subset of complex products should not be reason to deny the purchase of a different type of complex product of which the investor does possess a strong understanding. This may be remedied by having many specialized tests, but that could be prohibitively difficult to implement. Tests as described in this Notice would create an unnecessary barrier to entry without providing worthwhile protection for the investor. This Notice alludes to possible restrictions on complex product trading based on an investor's net worth. I disagree strongly with this concept. Investors should not be restricted from investment resources solely because of their net worth. A policy such as this would have a disproportionately severe impact on the type of investor who is potentially the most able to make effective use of complex products: young people. The high reward/high risk nature of these products is particularly appealing and beneficial for people far from retirement who can invest with a much higher risk tolerance. However, this type of investor will also have a lower net worth than they would later in life because they have had less time to save and grow their money. I do support the distribution of educational materials to investors. These only stand to assist them in making wise decisions, but they do not carry the negative effects of prohibitive policies and regulations.
James Martin Comment On Regulatory Notice 22-08
I do not believe testing investors' knowledge of complex products as a prerequisite to their purchase is an effective way to protect those investors. Test answers could be obtained from the internet without the investor actually retaining the knowledge effectively. Additionally, a lack of understanding of a particular subset of complex products should not be reason to deny the purchase of a different type of complex product of which the investor does possess a strong understanding. This may be remedied by having many specialized tests, but that could be prohibitively difficult to implement. Tests as described in this Notice would create an unnecessary barrier to entry without providing worthwhile protection for the investor. This Notice alludes to possible restrictions on complex product trading based on an investor's net worth. I disagree strongly with this concept. Investors should not be restricted from investment resources solely because of their net worth. A policy such as this would have a disproportionately severe impact on the type of investor who is potentially the most able to make effective use of complex products: young people. The high reward/high risk nature of these products is particularly appealing and beneficial for people far from retirement who can invest with a much higher risk tolerance. However, this type of investor will also have a lower net worth than they would later in life because they have had less time to save and grow their money. I do support the distribution of educational materials to investors. These only stand to assist them in making wise decisions, but they do not carry the negative effects of prohibitive policies and regulations.