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.
