Exchange-traded funds (ETFs) have become a subject of increasing regulatory scrutiny as fears grow that ETFs are unduly complex, are sold to unsuitable investors or pose systemic risk because of correlated risk and complexity resulting from ETF reliance on securities finance. Reflecting this, IOSCO is seeking views on “high-level principles” – that is, general standards that it believes could govern ETFs regardless of their distribution model. The thrust of these principles focus on disclosure, not mandatory classification of ETFs into funds suitable for specific investor classes or any other specific ETF restrictions. However, new suitability standards are recommended, along with additional compliance programs.
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