03.03.26

SEC Pushes Back Against New Wave of High-Leverage ETF Plans

by: Isabelle Lee; Vildana Hajric

The U.S. Securities and Exchange Commission (SEC) is urging issuers of leveraged exchange-traded funds (ETFs) to halt plans for a new wave of high-leverage funds, including proposals offering up to five times the daily return of underlying assets, citing concerns about compliance with Rule 18f-4, its derivatives risk-management framework. During a rare call with trustees and fund counsel, the SEC’s Division of Investment Management signaled that sponsors should not move forward with activating these products. The pushback comes as firms such as ProShares and others seek to expand offerings amid rapid growth in leveraged and single-stock ETFs, whose rising popularity with retail investors has heightened regulatory scrutiny over risk and market stability.

Read the full article on Bloomberg