Uniform labels would thwart investor confusion. If the current mess of ETF labels is confusing even for industry veterans, then it's likely to be confusing for retail investors.
But beyond what I've explained, Finra should not impose any further regulatory burdens on ETF firms that offer specialized products.
The job of a competent police force is to protect the city, not to destroy the institutions serving its inhabitants. For far too long, the financial services industry has become an over-regulated city that is underpoliced. It’s better to enforce existing rules than create new ones through “rule enhancements.”
As part of promoting better investor education, regulators should loudly evangelize about the idea that the investors are responsible for the risks and rewards of their own investment decisions. And better labels for specialized ETFs would create less confusion. Who can argue against that?
The comment period for notice 22-08 is open until May 9, 2022. If you’re a financial advisor, brokerage firm or any other entity that uses ETFs inside a portfolio, you may submit your comments to Finra right here.
Ron DeLegge is the founder at ETFguide.com. The Carlsbad, Calif.-based firm publishes original content and ETF focused research.