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Massachusetts Secretary of State William Galvin

Regulation and Compliance > State Regulation > Massachusetts

Galvin Launches Sweep of Single-Stock ETFs

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What You Need to Know

  • These are risky products, investing in only one stock, with no diversity cushion whatsoever, Galvin said.
  • Single stock ETFs present risks in the form of increased leverage and exposure to the volatility of only one stock.
  • These ETFs should not be used as long-term investments, Galvin said.

Massachusetts’ top securities regulator, William Galvin, announced Thursday that he’s launched a sweep of complex single-stock exchange-traded fund offerings recently made public and offered through broker-dealers registered in Massachusetts.

Galvin sent letters Thursday to Foreside Fund Services, IMST Distributors, ALPS Distributors and Quasar Distributors — registered broker-dealers in the Commonwealth which distribute the Direxion, AXS Investment, GraniteShares, and F/m Investments product lines, respectively.

Galvin wants the broker-dealers to answer questions by Sept. 1.

The Massachusetts Securities Division sweep focuses on the issuance of single-stock ETFs to retail investors, which Galvin said “present risks in the form of increased leverage and exposure to the volatility” of only one stock.

“These are risky products, investing in only one stock, with no diversity cushion whatsoever,” Galvin said. “For nearly all Main Street investors, there is no difference between investing your money in single-stock ETFs and gambling with that money at a casino.”

Like leveraged ETFs, single-stock ETFs require daily monitoring by the investor and do not track the underlying performance of a stock over time.

“Under no circumstances should an investor use these products as a long-term investment,” Galvin added.

Eric Balchunus, senior ETF analyst at Bloomberg, tweeted in response: Galvin is “looking into single stock ETFs, says they are risky bc they invest in only one stock so not diversified thus there’s no dif bt them and gambling in a casino. By that logic, he must think trading indiv stocks is a casino too (which it kinda is).”

Galvin said that while single-stock ETFs may be suitable for day traders, most retail investors would be better suited to invest their savings in long-term holdings.

His office will be reviewing offerings in Massachusetts “to ensure that broker-dealers are not recommending them to retail investors for whom they would be unsuitable.”


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