Buried in all the talk about what financial reform will do to the big Wall Street banks are lesser-known provisions aimed at protecting small investors. These measures may put the broker-dealer exchange traded fund (ETF) in a position to benefit.
The newly formulated Dodd-Frank financial overhaul bill may make brokers more accountable to clients, provide more information on hedge funds and improve transparency of complex derivatives, reports Eleanor Laise for Yahoo! Finance. Barbara Roper, director of investor protection at the Consumer Federation of America, believes that the legislation “lays the groundwork for significant improvements” in protection and disclosure, and also gives investors “a greater voice in the policies that affect their interests.” [Tom Talks FinReg on CNBC.]
The bill may also affect funds’ bond and derivatives holdings, along with how products may be advertised to investors. [Financial ETFs Move on Global Banking Reform.]
There’s $3 trillion sitting on the sidelines right now while investors wait for the kind of good news that will lure their dollars back into the markets. Additional layers of protection for investors may make the individual investor more comfortable. And when that money returns, brokers will be positioned to take advantage.
- iShares Dow Jones U.S. Broker-Dealers (NYSEArca: IAI): Top holdings include Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and Charles Schwab (NYSE: SCHW); in the last month, it’s up 6.7%
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.