Stephen DeVience Comment On Regulatory Notice 22-08
Stephen DeVience
N/A
I oppose restrictions on the public's ability to invest in complex products for numerous reasons.
1. The definition of a complex investment is vague, arbitrary, and subject to administrative change in the future. This can cause a new risk for investors who may hold these products now but may be restricted from them in the future, forcing them to sell the products.
2. Being a complex product does not necessarily reflect the riskiness of the product compared with other investments. A complex product following a single commodities future such as oil is likely less risky than the stock of a pharmaceutical startup.
3. Complex products allow retail investors to diversify their portfolio, hedge investments during times of volatility, and seek enhanced returns without riskier strategies such as using margin.
4. Restrictions such as wealth tests only serve to benefit the wealthy, who will be able to use complex products to their advantage while others can't. Wealth tests also do not reflect whether the user of the product is actually an intelligent investor. Wealthy people can be poor investors and many people with less money can be intelligent investors.
5. Product information is disclosed to all investors and it is the responsibility of the investor to learn and understand what those mean. If FINRA finds that retail investors are investing in products they don't understand, it may be reasonable to have the investors make some kind of acknowledgement before they are allowed to invest in them, so that they know these types of products exist and which types are considered complex. It is then their responsibility to learn about how they work.
6. People also invest in stocks with risks they don't understand. If these complex products can be restricted because they are considered risky, one could make the same argument for many classes of companies.
Stephen DeVience Comment On Regulatory Notice 22-08
I oppose restrictions on the public's ability to invest in complex products for numerous reasons.
1. The definition of a complex investment is vague, arbitrary, and subject to administrative change in the future. This can cause a new risk for investors who may hold these products now but may be restricted from them in the future, forcing them to sell the products.
2. Being a complex product does not necessarily reflect the riskiness of the product compared with other investments. A complex product following a single commodities future such as oil is likely less risky than the stock of a pharmaceutical startup.
3. Complex products allow retail investors to diversify their portfolio, hedge investments during times of volatility, and seek enhanced returns without riskier strategies such as using margin.
4. Restrictions such as wealth tests only serve to benefit the wealthy, who will be able to use complex products to their advantage while others can't. Wealth tests also do not reflect whether the user of the product is actually an intelligent investor. Wealthy people can be poor investors and many people with less money can be intelligent investors.
5. Product information is disclosed to all investors and it is the responsibility of the investor to learn and understand what those mean. If FINRA finds that retail investors are investing in products they don't understand, it may be reasonable to have the investors make some kind of acknowledgement before they are allowed to invest in them, so that they know these types of products exist and which types are considered complex. It is then their responsibility to learn about how they work.
6. People also invest in stocks with risks they don't understand. If these complex products can be restricted because they are considered risky, one could make the same argument for many classes of companies.