ETF Trends
ETF Trends

Despite tougher regulations and more attention, the exchange traded fund (ETF) industry continues to launch new and complex products. Is this really a bad thing, though?

The Securities and Exchange Commission (SEC) is taking a hard look at derivatives-based funds. While it examines funds that use derivatives, the regulator has put the kibosh on the launch of any new funds using them.

Chris Flood for The Financial Times reports that providers have been able to find a route to market by launching new products under the 1933 Securities Act. The restrictions imposed by the SEC only apply to exchange traded funds registered under the 1940 Investment Company Act.

However the SEC’s examination plays out, there’s one thing we know for sure: complex products do work for investors who use them with care and for those investors who take the time to ensure they understand what they’re buying.

If you’re trading in an area you don’t fully understand, you could get burned. Not all ETFs are a great fit for all investors, so doing your due diligence will go a long way.

Tisha Guerrero 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.