Gary Gensler: 'single-stock ETF may create exposures for investors that in many ways resemble buying shares on margin.' 'investing in them is meant to be similar to shorting a stock.'


Good morning. Once again, it is good to be back with the Investor Advisory Committee. As is customary, I would like to note that my views are my own and that I am not speaking on behalf of the Commission or SEC staff.

I want to begin by welcoming the Committee’s new Access and Inclusion Working Group. Access and inclusion are so important, as they relate directly to fairness in the markets. Fairness, of course, sits within the middle part of the SEC’s mission: to maintain fair, orderly, and efficient markets.

Today’s Investor Advisory Committee’s meeting will cover a range of investor issues through three panels.

I understand that your first panel is on account statements, which are important to all investors, especially retail investors. Account statements provide a primary avenues for investors to evaluate how their investments are performing and the costs in their portfolio. I look forward to hearing the panelists’ suggestions on how we can enhance these statements and make them more useful for investors.

Second, I understand that you have a panel discussing public companies’ disclosure of their taxes. I am glad to see this and look forward to the Committee’s discussion, as taxes are an important expense for public companies. Investors have expressed an interest in greater details, sometimes called disaggregation, with regard to income tax information. In an effort to make more informed investment decisions, investors have raised an interest in understanding more about tax information related to the specific jurisdictions in which companies operate, including how different tax strategies might impact companies’ tax rates. I understand the Financial Accounting Standards Board (FASB) recently proposed to enhance income tax disclosures in financial statements.[1] When the proposal is publicly released, I think it is important to consider such enhanced tax disclosures. Disaggregated tax reporting from international companies—in the specific jurisdictions in which those companies operate—could benefit investors.

Finally, I understand you have a panel looking at complex investment products known as single-stock exchange-traded funds (ETFs). As the SEC’s Office of Investor Education and Advocacy said in a statement earlier this year, single-stock ETFs, including levered and/or inverse single-stock ETFs, can present unique risks to investors, especially retail investors.[2] Holding a single-stock ETF is not the same thing as holding the underlying stock or a traditional ETF. Investing in a levered, single-stock ETF may create exposures for investors that in many ways resemble buying shares on margin. With respect to inverse single-stock ETFs, investing in them is meant to be similar to shorting a stock. Though these products are listed or traded on exchanges, they are not necessarily right for every investor. Further, they often are designed to be held for a short time period, such as a single day. Thus, I look forward to the panel’s discussion on these complex products and steps the SEC might take to advance investor protection in this area.

I wish you a productive meeting and happy holidays.

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