SEC Regulation Announcement

Oct 28, 2020

Today the U.S. Securities and Exchange Commission (SEC) adopted new regulations governing the use of derivatives by ETFs and mutual funds. These regulations do not place any additional regulatory burdens on investors’ ability to access leveraged and inverse funds.

ProShares applauds the SEC’s decision to place leveraged and inverse (geared) funds with multiples from 2x to -2x on a level playing field with all other ETFs and mutual funds and to not impose any new restrictions on investor access to these products. Under the adopted rule, these valuable products, which can be used to manage risk and enhance returns, will be available to investors with a greater degree of regulatory clarity and certainty. We also welcome the regulatory changes that will allow other companies to offer geared funds, and we believe those changes have the potential to benefit investors.

While the rule allows existing funds with multiples of 3x or -3x to continue to operate, we disagree with the rule’s prohibition of the introduction of new geared funds with these multiples. We believe this provision is not in investors’ best interest because it limits innovation, choice, and competition.

ProShares thanks the thousands of investors who, in their comments on the so-called sales practice proposal, spoke of the value that geared funds provide in helping them manage risk and enhance returns. More than six thousand diverse parties, over 97% of all those who submitted comments to the SEC, spoke loudly in opposition to the proposal. Commentors who opposed the proposal included individual investors, financial advisors, institutional investors, academics, securities exchanges, bar associations, and industry groups, among others.

We place considerable emphasis on educating investors about the operation and risks of all of the funds we offer, including the geared funds. We look forward to participating in the SEC’s review of the effectiveness of existing requirements to protect investors, particularly those with self-directed accounts.