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 Securities and Exchange Commission Democratic member Kara Stein
called for the reforms as part of a three-page dissent over a rule
change that paved the way for seven new exchange-traded funds from
AccuShares Investment Management LLC to list on the Nasdaq stock
market exchange.
The ETFs use so-called "Paired Class Shares" to issue and redeem
shares of opposing share classes that move in opposite directions,
known as "Up Shares" and "Down Shares."
Among the ETFs named are an industrial metals spot fund, a crude oil
spot fund, and a natural gas spot fund.
The commission approved the rule change last week, with members
noting that exchange's proposal to list and trade the funds is
consistent with the Securities Exchange Act of 1934 and the rules
and regulations applicable to a national securities exchange. The
adoption of new listing standards specific to the Paired Class
Shares is necessary before the AccuShares funds can start trading.
At the heart of Stein's concern is the complexity of the funds,
which would require investors to be extra vigilant in monitoring
their investments, and the potential harm to investors who may not
fully understand how the funds operate.
But her concerns about the approval of new listing standards, which
will enable the funds to trade, extend beyond the AccuShares
decision alone and call for a more thorough review process for other
similarly risky and complex products.
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"We need a more thoughtful, transparent, and fulsome review process
for these types of ETFs, even if it means disapproving proposed
rules changes until we get comfortable," with such products, Stein
wrote in the statement dated Monday.
She noted that a more rigorous review process is especially
necessary because making a rule change clears the path for other
"copycat" products to enter the market.
Stein also called for gathering more public input during the review
process to better take into account broader market and systemic
impacts of new ETFs.
"The Commission should be taking more affirmative steps to obtain
public comment and academic analysis in this space," she wrote.
(Reporting by Ashley Lau in New York; Editing by Lisa Shumaker)
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