Finra’s attempts at “further regulation here should be trying to fix real problems without cutting off access to real, valuable investment opportunities for the average investor. A smart combination of clear, well-understood, definitions and disclosure-based gates is the best angle to take.” he continued.
But not all industry insiders argued against the need for added regulation of complex products. Louis Straney, a former broker and branch manager who specialized in options trading and is now an expert witness in securities fraud arbitration claims, called Finra’s push for regulation “very important, since I have often observed that advisors, their supervisors, national sales management and Finra arbitrators are sorely deficient in their understanding of option risks and characteristics and other derivative strategies.”
Pending any action on new regulations, Finra and SEC examiners are already cracking down on alleged abuses in exams and enforcement cases.
“The SEC’s Division of Examinations has noted that it will continue to focus on complex products in its examinations, including examining that broker-dealers are meeting their legal and compliance obligations when providing retail customers access to complex strategies, such as options trading and complex products,” Finra said.
Nadig said he believes the “SEC is the appropriate jurisdiction to continue to define and maintain any kind of classification of products by type or structure.”