Im writing to provide strong rebuke of FINRAs Regulatory Notice 22-08 and its attempt to limit investors/traders (I/Ts). What FINRA is proposing is tantamount to treating I/Ts like immature children. Its highly evident in the statement FINRA released: However, important regulatory concerns arise when investors trade complex products without understanding their unique characteristics and risks. Like complex products, trading in options may pose risks if investors do not have the financial experience to understand options and options trading strategies.
Why treat I/Ts like children? In fact, is it even FINRAs responsibility to prevent/limit _how_ I/Ts put their money into the market? I argue no! From the FINRA website: FINRA Regulates Broker-Dealers, Capital Acquisition Brokers, and Funding Portals. A Broker Dealer is in the business of buying or selling securities on behalf of its customers or its own account or both. A Capital Acquisition Broker is a Broker Dealer subject to a narrower rule book. A Funding Portal is a crowd funding intermediary.
The website also adds that FINRA will Write and enforce rules governing the ethical activities of all registered broker-dealer firms and registered brokers in the U.S.
How is recommending limits on what we buy even in the scope of FINRAs mission? Is FINRA suggesting that broker-dealers are unethically allowing I/Ts to purchase complex securities? If FINRA is saying its unethical, they may as well put all their cards on the table and call a spade a spade. But is that even necessary? Seriously, FINRAs writing of Notice 22-08 is abhorrent. So what if a legal, consenting adult didnt do due diligence in reading the prospectus? So what if a legal, consenting adult doesnt have the financial experience to understand options and options trading strategies? Why is FINRA worried about this?
FINRA notes that I/Ts have increasingly moved from a time when the majority of individuals accessed financial products through financial professionals, rather than through self-directed platforms. Wait, so it was fine when a financial professional was saying its a risky idea, but its your money, but now its not fine when a self-directed platform is saying its a risky idea, but its your money? What is the difference?
Additionally, in FINRAs statement is the following: as SEC Chair Gensler has recently suggested, complex products can potentially create system-wide risks by operating in unanticipated ways when markets experience volatility or stress conditions. Trading in complex products may also affect underlying assets. Thus, well-conceived protections in the sale and trading of complex products benefits market integrity in underlying markets.
My response: If this is such a concern, why isnt the SEC limiting the creation of these funds/notes and dictating restrictions on the decay many of them so heavily take advantage of? Is it because they let the genie out of the bottle? https://www.bloombergquint.com/opinion/sec-may-regret-the-day-it-allowe… It should be the SEC, who allowed leveraged or complex ETF/Ns in the first place, yet FINRA wants to treat us like irresponsible children?
In a response to SEC File No. S7-24-15, one Wesley Brand states, I think the proposed diligence required by the broker is unnecessarily burdensome and that the investor alone is responsible for their own due diligence. By suggesting strong limitations or even prohibitions on I/Ts engaging with these securities, FINRA (and the SEC) is suggesting there is a greater responsibility to I/Ts than the I/Ts themselves.
Dont try to be a helicopter parent and try to protect us from ourselves. Instead, _at most_the SEC should be placing greater qualifications on getting an ETF/N approved and limiting the effects of decay on those products. And even that feels like too much.
And finallythe elephant in the roomwhy spend so much effort on this topic instead of ACTUALLY fighting the rampant abuse of naked short selling, a practice long-known to occur in the market, yet regulators continue to turn a blind eye to. Want to earn the hearts and respect of I/Ts? Focus on the elephant in the room, the naked short selling affecting securities like GTII and destroying lives. This? Why? I ask.
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Shawn Douglas Comment On Regulatory Notice 22-08
Im writing to provide strong rebuke of FINRAs Regulatory Notice 22-08 and its attempt to limit investors/traders (I/Ts). What FINRA is proposing is tantamount to treating I/Ts like immature children. Its highly evident in the statement FINRA released: However, important regulatory concerns arise when investors trade complex products without understanding their unique characteristics and risks. Like complex products, trading in options may pose risks if investors do not have the financial experience to understand options and options trading strategies.
Why treat I/Ts like children? In fact, is it even FINRAs responsibility to prevent/limit _how_ I/Ts put their money into the market? I argue no! From the FINRA website: FINRA Regulates Broker-Dealers, Capital Acquisition Brokers, and Funding Portals. A Broker Dealer is in the business of buying or selling securities on behalf of its customers or its own account or both. A Capital Acquisition Broker is a Broker Dealer subject to a narrower rule book. A Funding Portal is a crowd funding intermediary.
The website also adds that FINRA will Write and enforce rules governing the ethical activities of all registered broker-dealer firms and registered brokers in the U.S.
How is recommending limits on what we buy even in the scope of FINRAs mission? Is FINRA suggesting that broker-dealers are unethically allowing I/Ts to purchase complex securities? If FINRA is saying its unethical, they may as well put all their cards on the table and call a spade a spade. But is that even necessary? Seriously, FINRAs writing of Notice 22-08 is abhorrent. So what if a legal, consenting adult didnt do due diligence in reading the prospectus? So what if a legal, consenting adult doesnt have the financial experience to understand options and options trading strategies? Why is FINRA worried about this?
FINRA notes that I/Ts have increasingly moved from a time when the majority of individuals accessed financial products through financial professionals, rather than through self-directed platforms. Wait, so it was fine when a financial professional was saying its a risky idea, but its your money, but now its not fine when a self-directed platform is saying its a risky idea, but its your money? What is the difference?
Additionally, in FINRAs statement is the following: as SEC Chair Gensler has recently suggested, complex products can potentially create system-wide risks by operating in unanticipated ways when markets experience volatility or stress conditions. Trading in complex products may also affect underlying assets. Thus, well-conceived protections in the sale and trading of complex products benefits market integrity in underlying markets.
My response: If this is such a concern, why isnt the SEC limiting the creation of these funds/notes and dictating restrictions on the decay many of them so heavily take advantage of? Is it because they let the genie out of the bottle? https://www.bloombergquint.com/opinion/sec-may-regret-the-day-it-allowe… It should be the SEC, who allowed leveraged or complex ETF/Ns in the first place, yet FINRA wants to treat us like irresponsible children?
In a response to SEC File No. S7-24-15, one Wesley Brand states, I think the proposed diligence required by the broker is unnecessarily burdensome and that the investor alone is responsible for their own due diligence. By suggesting strong limitations or even prohibitions on I/Ts engaging with these securities, FINRA (and the SEC) is suggesting there is a greater responsibility to I/Ts than the I/Ts themselves.
Dont try to be a helicopter parent and try to protect us from ourselves. Instead, _at most_the SEC should be placing greater qualifications on getting an ETF/N approved and limiting the effects of decay on those products. And even that feels like too much.
And finallythe elephant in the roomwhy spend so much effort on this topic instead of ACTUALLY fighting the rampant abuse of naked short selling, a practice long-known to occur in the market, yet regulators continue to turn a blind eye to. Want to earn the hearts and respect of I/Ts? Focus on the elephant in the room, the naked short selling affecting securities like GTII and destroying lives. This? Why? I ask.