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U.S. SEC Issues Warning Letters to ETF Issuers Targeting Highly Leveraged Products

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On December 4, according to Cointelegraph, the U.S. Securities and Exchange Commission (SEC) has sent warning letters to several exchange-traded fund (ETF) providers, suspending the approval of ETF applications with leverage exceeding 200%. ETF issuers Direxion, ProShares, and Tidal have received letters from the SEC citing relevant legal provisions in the Investment Company Act of 1940. This law sets a cap on the risk exposure of investment funds, stipulating that it cannot exceed 200% of the value risk of their “reference investment portfolio” (comprised of unleveraged underlying assets or benchmark indexes).

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