SEC Panel Slams Single-Stock ETFs

Funds run ‘counter to the spirit’ of ETFs, advisory group members testify.

Reviewed by: Ron Day
Edited by: Ron Day

Single-stock exchange-traded funds miss the point of a 2019 Securities and Exchange Commission rule that was designed to open up the ETF industry to broader competition, members of an SEC advisory panel recently testified. 

“Single-stock ETFs run entirely counter to the spirit of ETFs today as we all know,” said Patrick Cleary, CEO of ETF Architect and a member of a panel that addressed the SEC’s Investor Advisory Committee Dec. 8. “Single stock ETFs are high cost, they are tax inefficient and they are opaque.” 

Single-stock ETFs, which have traded since 2018 in Europe, were permitted in the U.S. under 2019’s 6c-11 rule that was passed to simplify fund creation. They seek to beat the performance of an underlying stock such as Tesla Inc. with the assistance of derivatives contracts.  

Despite initial fanfare, the funds have failed to catch on, reported this week. Only 26 single-stock ETFs trade in U.S. markets, with a total of $286 million in assets under management as of Dec. 13. The overall ETF market encompasses $6.6 trillion in assets across more than 3,059 listings.   

In a virtual video discussion, panel members largely cautioned that single-stock ETFs are overly risky, especially to inexperienced investors. 

“You can easily have a 100% loss overnight in these products and that is obviously not what an ETF is intended to do,” Bob Elliott, chief investment officer of Unlimited Funds said. “It’s just totally inconsistent with the desired goals that have been outlined in this panel.” 

Most single-stock ETFs are in Tesla, Inc.-focused funds, which hold $208 million in assets. 

The latest criticism wasn’t the first levied at the funds. SEC Commissioner Caroline Crenshaw warned this summer about the risks for investors and possibly markets. 

That theme was echoed on the panel and in final comments from committee chair Christopher Mirabile, who is the senior managing director of Launchpad Venture Group. 

“We've made a great case for proving that the single stock ETFs can be toxic,” he said. 


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Ron Day is deputy managing editor at He covered business and financial news at Bloomberg News for 20 years, was senior editor at ESG news outlet Karma Impact, and covered general news at several New Jersey daily papers. Day's freelance work has been published in, and