On December 4, according to Cointelegraph, the U.S. Securities and Exchange Commission (SEC) has sent warning letters to several exchange-traded fund (ETF) providers, suspending the approval of ETF applications with leverage exceeding 200%. ETF issuers Direxion, ProShares, and Tidal have received letters from the SEC citing relevant legal provisions in the Investment Company Act of 1940. This law sets a cap on the risk exposure of investment funds, stipulating that it cannot exceed 200% of the value risk of their “reference investment portfolio” (comprised of unleveraged underlying assets or benchmark indexes).
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U.S. SEC Issues Warning Letters to ETF Issuers Targeting Highly Leveraged Products
On December 4, according to Cointelegraph, the U.S. Securities and Exchange Commission (SEC) has sent warning letters to several exchange-traded fund (ETF) providers, suspending the approval of ETF applications with leverage exceeding 200%. ETF issuers Direxion, ProShares, and Tidal have received letters from the SEC citing relevant legal provisions in the Investment Company Act of 1940. This law sets a cap on the risk exposure of investment funds, stipulating that it cannot exceed 200% of the value risk of their “reference investment portfolio” (comprised of unleveraged underlying assets or benchmark indexes).