Reuters: Regulatory News: SEC issues investor bulletin on ETFs

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SEC issues investor bulletin on ETFs Aug 13th 2012, 19:00 Mon Aug 13, 2012 3:00pm EDT * Agency advises investors to check on costs * Warns investors to understand what they are buying By Jessica Toonkel NEW YORK, Aug 13 (Reuters) - The U.S. Securities and Exchange Commission on Monday issued an investor bulletin on exchange-traded funds, explaining how they trade and the differences between the various types of products. In the United States, ETFs - baskets of securities similar to mutual funds that trade on exchanges like individual stocks - have become more popular with investors in recent years. ETFs now hold $1.2 trillion in assets. But investors need to know how to invest in ETFs and the differences between more complex products and plain vanilla funds, according to the bulletin, which was issued by the agency's Office of Investor Education and Advocacy. "If you cannot explain the investment opportunity in a few words and in an understandable way, you may need to reconsider the potential investment," the agency said in its bulletin. Specifically, the agency advises investors to learn about all the costs associated with an ETF - including brokerage commissions - before investing. The agency also advises investors to make sure that their needs would not be better suited with a similar mutual fund. The Office of Investor Education and Advocacy regularly publishes bulletins on a number of topics, an SEC spokesman said. Last October, the SEC's Division of Investment Management said it had launched a broad review of exchange-traded funds to ensure that they are adequately transparent and are not fueling market volatility. This investor bulletin marks the first time the agency has addressed ETFs publicly since Norm Champ, the former deputy director of the agency's examinations program, replaced Eileen Rominger as head of the SEC's division of investment management. Link this Share this Digg this Email Reprints

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