Exchange traded notes are not exchange traded funds. ETNs are packaged differently and are even marketed toward a different target audience, critics argue.

As the Securities and Exchange Commission tells banks to provide clearer disclosures on ETNs for retail investors, some banks are contending that the investment products weren’t created for retail use to begin with, reports Yakob Pterseil for Risk. [SEC Seeks to Clarify ETN Disclosures]

“Yes, ETNs can be bought by retail, but typically there will be a broker who’s recommending them, and they’re only recommending them to someone they think is sophisticated and generally institutional,” one New York-based lawyer for issuers said in the article.

ETNs, like ETFs, are listed on an exchange and track an underlying index; however, ETNs are a type of unsecured debt issued by an underwriting bank. [What Are ETNs?]

“You can’t stop pure retail from buying them,” the head of sales for one top-three issuer said in the article. “But with the bespoke products, it’s really the end-clients of the people who developed it who are buying them.”

ETNs were mostly created for targeted institutional investors who can provide the initial seed money for the investment.

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