Washington, D.C. – In a letter to the SEC regarding its revised proposal to regulate funds’ use of derivatives and the sale of leverage and inverse trading vehicles, CFA detailed how funds’ misuse of derivatives and investors’ improper use of leveraged and inverse vehicles pose serious risks that deserve a serious regulatory response. The SEC has not proposed such a response, according to the letter. The proposal regarding funds’ use of derivatives would not meaningfully protect against the risk that funds engage in excessive speculation or the risk that they operate without sufficient assets to cover potential losses. This largely permissive and deferential approach amounts to little more than a paperwork exercise for funds. And while CFA commended the SEC for recognizing the need to address the risk that investors are misusing leveraged and inverse vehicles, CFA highlighted how the SEC has failed to provide any evidence that its proposed regulatory approach would reduce the risk that investors would continue to misuse leveraged and inverse vehicles. For these reasons, CFA urged the SEC to go back to the drawing board and propose a regulatory solution that adequately protects investors, rather than the deferential, “industry knows best approach” it has proposed here.