SEC Scrutinizes Novel ETFs as Complexity and Risk Grow

The SEC is revisiting the boundaries of what it calls 'novel' ETFs, which are funds that invest in innovative asset classes or use novel strategies.

The agency has requested public comment on these products, including crypto assets, commodity-focused instruments, single-stock strategies, and others.

Crypto ETFs will face particular scrutiny due to their combination of volatile underlying markets with a familiar retail wrapper.

The SEC is concerned that the trust associated with traditional ETFs is being stretched too far by newer, more complex products.