Riskiest ETFs Get Green Light, But Brokers Might Not Touch Them
- SEC proposal would allow more issuers to create leveraged ETFs
- Brokerages may not sell these funds due to extra due diligence
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A plan to greenlight some of the ETF industry’s most controversial products comes with a caveat that could doom them to irrelevance.
Asset managers will soon have free rein to create leveraged and inverse exchange-traded funds under a recent proposal from the U.S. regulator that ends a 10-year moratorium on new issuers. But the plan, which could fuel a proliferation of juiced-up products, comes with a big catch: The brokerage firms that sell these funds must determine whether investors understand their risks -- a transition that could discourage brokers from offering them at all.