In This Issue:

FINRA Voices Concerns About Exchange-Traded Notes and Worth the Wait? And, Draft PRIPs Legislation Finally Published.

Excerpt from FINRA Voices Concerns About Exchange-Traded Notes

On July 10, 2012, the Financial Industry Regulatory Authority, Inc. (“FINRA”) published an investor alert titled “Exchange-Traded Notes—Avoid Unpleasant Surprises.” The investor alert can be found at: http://www.finra.org/ Investors/ProtectYourself/InvestorAlerts /TradingSecurities/P131262. The investor alert describes the features of a typical exchange-traded note (“ETN”) and also focuses on areas of concern to FINRA.

Leveraged and Inverse ETNs

The investor alert describes how leveraged and inverse features of certain ETNs may be confusing to non-professional investors. Because of the related “reset” feature, which may be daily or monthly, the performance of a two times leveraged (including a two times leveraged inverse) ETN will not be the same as two times the performance (or two times the inverse performance) of the underlying asset. Consequently, FINRA points out that ETNs with leveraged or inverse features are more appropriate as short-term trading tools and should not be purchased by “buy and hold” investors.