Wall Street Rush Into Single-Stock ETFs Takes Risky Foreign Turn
Wall Street watchdogs already concerned about the risks of single-stock ETFs won’t like what’s coming next: funds offering exposure to individual foreign shares unbound by US listing standards.
Issuers have filed plans for at least 129 ETFs targeting non-US companies in the past month, most of which don’t have depository receipts trading on American exchanges. That generally means the underlying firms don’t have to meet the same financial reporting standards as a US-listed business.
It raises the prospect of American investors gaining easy access to foreign companies whose finances may not be fully transparent -- putting people at risk of making ill-informed trades.
“It seems problematic to allow exchange trading on products that contain nothing but unvarnished exposure to companies that can’t normally be traded on those exchanges,” said Steve Sosnick, chief strategist at Interactive Brokers. The US tends to have more stringent rules than other countries, and those standards “are designed to ensure that companies offer adequate disclosure of a company’s profits, losses and risks,” he said.
The proposed funds are still under review, meaning the US Securities and Exchange Commission could yet block them. However, it’s unclear whether that will happen. Regulators were vocally unhappy with the very idea of single-stock exchange-traded funds, but didn’t prevent the launch of the first products in July. Since then, about two-dozen have debuted.
https://www.bloomberg.com/news/articles/2022-09-17/wall-street-rush-into-single-stock-etfs-takes-risky-foreign-turn?srnd=premium&leadSource=uverify%20wall
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