Regulatory Outlook | 11.18.20
SEC Warns RIAs and BDs About Complex ETPs
The SEC is warning registered investment advisors and broker dealers to “implement robust and effective policies and procedures” to prevent violation of federal securities laws when they advise on or recommend complex exchange-traded products (ETPs). Just days after the agency settled charges with five firms for making unsuitable sales of complex ETPs to retail investors, the SEC issued a public statement admonishing firms to ensure that their financial professionals understand the risks and purpose of complex ETPs. The SEC noted that “under the Regulation Best Interest and an investment advisor’s federal fiduciary duty,” a financial professional recommending complex risk products should “apply heightened scrutiny” to understand the features and risks of such products and whether a particular a product fits within a client’s or customer’s risk tolerance and trading objective. The responsibility is also that of the financial firm that allows its financial professionals access to the products, the SEC stressed,
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