The Securities and Exchange Commission, the U.S. regulator set up following the stock-market crash of 1929 to protect investors, is sending a new message: Anything goes.
The SEC approved a New York Stock Exchange proposal last week that would allow ForceShares LLC to sell a pair of new exchange-traded funds that aim to give investors four times any daily gains -- or losses -- in the Standard & Poor's 500 Index. In a U.S. ETF industry that has mushroomed in recent years to about $2.8 trillion and some 2,000 investment vehicles, they would be the first quadruple-leveraged, or "4x," funds to win approval.
The new ruling sends a signal that the agency's leadership, as overhauled by President Donald Trump, may tolerate more risk in financial products than the prior administration would permit. Former SEC Chairwoman Mary Jo White, who stepped down earlier this year, had led a push to ban triple-leveraged, or "3x," funds -- on the grounds that they were too risky.
SEC officials didn't respond to requests via phone and e-mail for comment.
Trump has pledged to scrap many regulations on the financial industry, including those enacted in the wake of the 2008 crisis, asserting that the push will reduce costs for firms, investors and bank customers while freeing up credit and accelerating economic growth. The new president in April ordered a delay and review of a proposed Department of Labor rule that would require most financial advisors to act in the best interests of clients when administering retirement plans -- a requirement long resisted by brokerage firms because it would eat into profits.