Generally, complex products as described in this notice should be available to individual investors ('retail') with some obligation on the brokerage to ensure the individual investor understands the structure and risks associated with the complex product. Some brokers do a very good job of this and others seem to just 'check the box'. I think it's appropriate to put a strict notice or some sort of limited/not overly obstructive test in place to allow access to investment options that greatly increase the available leverage or risk of loss to an individual investor. Some options at the tail end of the risk spectrum should be disallowed or even illegal in my opinion - examples of this would be naked shorting of securities and naked call writing. These have truly undefined loss potential and rely on a broker closing positions to prevent unnecessary loss. Leveraged ETFs are a relatively safe investment compared to other complex products - for these it seems appropriate to ensure the individual investor seeking to purchase would be required to read a concise summary highlighting the increased risk of loss or underperformance associated with such funds.
Timothy Ewing Comment On Regulatory Notice 22-08
Generally, complex products as described in this notice should be available to individual investors ('retail') with some obligation on the brokerage to ensure the individual investor understands the structure and risks associated with the complex product. Some brokers do a very good job of this and others seem to just 'check the box'. I think it's appropriate to put a strict notice or some sort of limited/not overly obstructive test in place to allow access to investment options that greatly increase the available leverage or risk of loss to an individual investor. Some options at the tail end of the risk spectrum should be disallowed or even illegal in my opinion - examples of this would be naked shorting of securities and naked call writing. These have truly undefined loss potential and rely on a broker closing positions to prevent unnecessary loss. Leveraged ETFs are a relatively safe investment compared to other complex products - for these it seems appropriate to ensure the individual investor seeking to purchase would be required to read a concise summary highlighting the increased risk of loss or underperformance associated with such funds.