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For decades, Americans of all incomes have looked to the investment markets as an opportunity to build wealth and achieve goals such as putting their kids through college and retiring among other things. Over the years those opportunities have continued to increase with increasing levels of innovative offerings from simple stocks and bonds to mutual funds, ETF’s, IPO’s, dividends, cryptocurrencies and much more.

These investments come with risks and rewards and investors buying through brokers or on their own are made aware of, and acknowledge, those risks through disclosures. Though this system has delivered great benefits to investors and an ever-expanded number of investment products, regulators and know it all’s have decided otherwise.

If a congressionally created federal board of unelected appointees known as the Financial Industry Regulatory Authority (FINRA) has their way, you would be unable to invest in what they deem as products that are too “complex” unless you took an in-depth financial services test and had a high net worth prior to purchase among other requirements.

FINRA’s mission is benign enough, to ensure fair financial markets. And FINRA spends a lot of time, energy and effort monitoring markets to identify and weed out any manipulation which puts private investors at an unfair disadvantage.  But, it is absurd for this group to determine that certain investment should be restricted to those who can pass a complex test and were already wealthy. 

What’s more, the proposed FINRA regulation would prevent unapproved private investors from purchasing common investment choices like closed end mutual funds, high yield bond funds, funds using cryptocurrency futures, commodities funds, currency funds among many other types of assets. The precedent this sets could allow FINRA, as well as government regulators, to impose such requirements on other investment products – IPO’s for example.

Obviously, each investor should make certain that they have an understanding of what they are investing in, that is their responsibility.  As an example, I knew years ago that cryptocurrency was going to be the next big thing, yet I did not invest in it, because I fundamentally did not understand where non-governmental backed currencies got underlying value, and was unwilling to accept the risks involved. That was my choice to make, whether the investment went to zero, or as Bitcoin did, exploded up 40 times above its value five years ago.

Yet, FINRA would even deny investors access to mutual funds that buy a market basket of cryptocurrencies. This mutual fund approach saves the investor from having to choose between Bitcoin, Dogecoin, Etherium and countless other emerging cryptos, but instead would invest in the overall market. This type of diversification is exactly what many FINRA certified financial service advisors push, where an investment is shielded from the volatility of one type of crypto, while being able to invest based upon the potential upside of the overall crypto market.

Apparently, the more than 100,000 Bitcoin millionaires really should have gotten approval from this quasi-government agency before they invested. 

To be fair, FINRA would be correct to ensure that the cryptocurrency trading markets like Coinbase are operated fairly and ethically, that is their job. But they need to butt out when it comes to telling private investors what investments they need to pass an extensive test or already be wealthy in order to invest their money.

Ironically, while FINRA is more than willing to shut the door on American investors accessing an array of widely used investments, but eerily quiet when it comes to investments in Chinese stocks and bonds which pose real threats to private investors on public markets. Mutual funds run by Vanguard, Fidelity and many others put their clients into Chinese companies which do not meet the same transparency standards that the Securities and Exchange Commission requires of other foreign and domestic companies.  Chinese companies are fraught with price manipulation and insider trading. Just last year, the government of China decided that publicly traded Chinese banks made too much money so they confiscated shareholder profits to invest that money back into the Chinese economy due to the Coronavirus pandemic. Neat trick to get US investors to partially finance the bailout of Chinese companies by redirecting the very dividends that initially drew these investors into the Chinese banking sector.

Yet, while FINRA wants to make investment decisions for each of us through a misguided regulation, they allow investment in the shadowy world of Chinese Communist Party controlled business entities.

If FINRA wants to do something to protect private investors and the integrity of the markets, it would do well to drop the overreaching restrictions on choices that private investors can make, and concentrate instead on investments which, on their face, don’t meet basic fiduciary standards.

Richard Manning is president of Americans for Limited Government

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