While I understand the nature of trying to protect investors from themselves on investing in certain investment strategies, the criteria presented as possible restrictions potentially goes too far. Investment knowledge does not always equate to net worth size noting that the greatest generation is passing more and more assets to younger generations including some that have very little investment experience/knowledge. I would potentially be okay with a test, however, administratively would be costly and difficult to prove the client did not look up correct answers. Approval from broker along with attesting to reading materials would be a good solution. Cooling off periods would prohibit the opportunity to actually use leveraged products the way they were intended with capturing gains from short term movements. I am a financial advisory that currently holds the Series 7, 9, 10, 31, and 66 licenses and get that investors sometimes need to be helped but for the correct situation, these investment strategies can be very powerful. My firm currently has a net worth restriction on our full brokerage and advisory platforms while the self directed platform has no restrictions other than warnings when placing the order. I think an investor who actually even knows about leveraged investments is capable of doing some research on how it works and the extra levels of risk that is explained through the prospectus. Individual investors should have the right to invest in whatever they feel is suitable.
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Tom DeToro Comment On Regulatory Notice 22-08
While I understand the nature of trying to protect investors from themselves on investing in certain investment strategies, the criteria presented as possible restrictions potentially goes too far. Investment knowledge does not always equate to net worth size noting that the greatest generation is passing more and more assets to younger generations including some that have very little investment experience/knowledge. I would potentially be okay with a test, however, administratively would be costly and difficult to prove the client did not look up correct answers. Approval from broker along with attesting to reading materials would be a good solution. Cooling off periods would prohibit the opportunity to actually use leveraged products the way they were intended with capturing gains from short term movements. I am a financial advisory that currently holds the Series 7, 9, 10, 31, and 66 licenses and get that investors sometimes need to be helped but for the correct situation, these investment strategies can be very powerful. My firm currently has a net worth restriction on our full brokerage and advisory platforms while the self directed platform has no restrictions other than warnings when placing the order. I think an investor who actually even knows about leveraged investments is capable of doing some research on how it works and the extra levels of risk that is explained through the prospectus. Individual investors should have the right to invest in whatever they feel is suitable.