Stacy Fuller and Dave Nadig discuss how FINRA rule 22-08 could limit retail investor access to many mutual funds, ETFs, and closed-end funds on ETF TV

ETF TV News #111 Stacy Fuller, Partner at K&L Gates and Dave Nadig, Financial Futurist at ETF Trends discuss how FINRA rule 22-08 could limit retail investor access to many mutual funds, ETFs, and closed-end funds with Deborah Fuhr on ETF TV #PressPlay

FINRA is seeking comments by May 92022 on Effective Practices and Rule Enhancements for Sales Practice Obligations for Complex Products and Options Rule 22-08

The Notice describes “complex products” as any product – Mutual Fund, ETF, ETN, Closed End Fund – with “features that may make it difficult for a retail investor to understand the essential characteristics of the product and its risks.” 

FINRA may make investors pass tests, get pre-approved to buy many types of mutual funds, ETFs, and other investments

FINRA concedes it has no “standard definition” of a “complex” product, FINRA identifies in the Notice or has previously flagged as “complex” or difficult for investors to understand a long list including the following types of securities:

  • Non-traditional index funds: Smart beta; Quant; Custom index; ESG
  • Emerging market funds
  • High yield bond funds
  • Target date funds
  • Floating-rate loan funds
  • Unconstrained bond funds
  • Insurance-linked securities

FINRA’s unprecedented measures could severely restrict self-directed investors from freely accessing public markets and useful investments, including many commonly used Mutual Funds, ETFs, ETNs, Closed End Funds and other public securities.

Investors, asset managers, financial advisors should respond to FINRA by May 9, 2022.

Comments must be submitted through one of the following methods:

Jennifer Piorko Mitchell
Office of the Corporate Secretary
1735 K Street, NW
Washington, DC 20006-1506

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Published on April 19, 2022

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