Gensler Delivers Remarks at IAC Meeting on Single Stock ETFs

In his opening remarks at the SEC Investment Adviser Committee meeting, Chair Gary Gensler briefly touched on the rise in popularity of single-stock ETFs, including inverse and levered products. Gensler noted that holding a single-stock ETF is not the same as directly holding a share of an issuer, it involves more risk, particularly to retail investors. He noted that “[i]n particular, investing in a levered single-stock ETF may create exposures for investors that in many ways resemble buying shares on margin.” He also noted that owning an inverse, single-stock ETF is meant to mimic shorting a particular stock. He noted these products are meant to be held for a very short period of time and “[t]hough these products are listed or traded on exchanges, they are not necessarily right for every investor.” He noted the SEC staff recently published a bulletin covering the obligations of those offering single-stock ETF products and noted the “heightened scrutiny” advisers and brokers should be taking when dealing in these products. His comments also touched on predicative data analytics, and he noted the potential conflict of interest inherent in using AI and machine learning in the financial services space.

Click here to read Gensler’s remarks at the IAC June meeting.