According to the Securities Act of 1933, ETNs are allowed to offer private offerings to a limited number of persons or institutions and limit the size of their offerings. As such, issuing banks may shut off supply of new shares whenever they deem it necessary. The ETN product is not obligated to have a board of directors with fiduciary responsibilities or to standardize their disclosures.
In an ETN's product prospectus sheets, it states that notes may be influenced by supply and demand and any suspension of new issuances may also influence the market value of the notes. Specifically, limitations on new issuances and sales could cause an imbalance of supply and demand for the notes in the secondary markets, which could cause the products to trade at a premium or discount.
As the exchange-traded product universe continues to expand, it is important to realize the differences in fund products, so that investors may adequately judge the level of risk they are willing to be exposed to.