SIFMA on FINRA Complex Products and Options
Summary
SIFMA provided comments to FINRA on Notice 22-08, Complex Products and Options. The Notice raises regulatory concerns about retail investors who trade complex products and/or options without adequately understanding their risks, and solicits comments on whether additional regulatory requirements should be imposed to address those concerns.
Excerpt
May 9, 2022
Via E-Mail to pubcom@finra.org
Jennifer Piorko Mitchell
FINRA, Office of the Corporate Secretary
1735 K Street, NW
Washington, DC 20006-1506
Re: FINRA Regulatory Notice 22-08, Complex Products and Options
Dear Ms. Mitchell:
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to comment on Notice 22-08 (the “Notice”).2 The Notice raises regulatory concerns about retail investors who trade complex products and/or options without adequately understanding their risks, and solicits comments on whether additional regulatory requirements should be imposed to address those concerns. We understand that FINRA plans to coordinate its response to this request with the SEC’s development of its regulatory approach to this topic.3 We respectfully submit the following comments and recommendations for your consideration.4
Part I addresses the current regulatory regime for options and complex products. Part II addresses the best interest standard applicable to brokerage accounts where financial professionals may recommend options and/or complex products to retail customers. Part III addresses what we view as the central focus of the Notice, that is, transactions in options and complex products by retail investors through self-directed platforms, or otherwise on a self-directed, non-recommended basis. We examine
1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).
2 Notice 22-08, Complex Products and Options (Mar. 8, 2022), https://www.finra.org/rules-guidance/notices/22-08.
3 SEC Chair Gary Gensler, Statement on Complex Exchange-Traded Products (Oct. 4, 2021), https://www.sec.gov/news/public-statement/gensler-statement-complex-exchange-traded-products-100421 (directing SEC staff to study this area and recommend changes, if appropriate).
4 The Asset Management Group of SIFMA is submitting an additional comment letter under separate cover to express the views of the asset management community.