Here’s to limits being broken … or at least sidestepped.

The Securities and Exchange Commission last week approved a rule allowing Cboe BZX, a major US securities and ETFs exchange, to begin listing six separate 3x leveraged funds from Volatility Shares. The company, along with others, has long asked the agency to approve such strategies, even filing for 5x leveraged funds late last year. This latest move marks a departure from the SEC’s typical wariness regarding leveraged products, having just halted reviews of ETFs with more than 2x leverage in December. But the distinction the SEC made this week is in regard to regulatory structure, not economic risk, securities lawyer Adam Gana said.

“These commodity-based products are operating through a different regulatory framework than traditional 1940 Act funds,” Gana said. “To the average retail investor, however, that distinction is nonexistent. They see an ETF in their brokerage account.”

Exchange-Traded Something

The SEC’s reasoning is that these specific Volatility Shares funds, unlike other 3x, 4x and even 5x proposed funds that issuers have tried to launch, can be regulated by the Securities Act of 1933 rather than the Investment Company Act of 1940. Under the ‘40 Act’s rule 18f-4, which was passed in 2020 and regulates funds’ use of derivatives, registered ETFs can’t offer more than 2x leverage. There are a handful of 3x funds in existence, but these preceded the rule and were grandfathered in. Volatility Shares, by going through the ‘33 Act, avoids the 2x limit. “All six that were filed, they’re all crypto- and commodity-based, so [Volatility Shares was] able to use this pathway,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. “When you think of other 4x, 5x and other 3x [products], a lot of those are single-stock ETFs, and those wouldn’t have qualified.”

Volatility Shares, which declined to comment, will now have more leveraged products available:

• The SEC’s latest move will allow the issuer’s 3x products tracking gold, silver, bitcoin, ether, crude oil and natural gas to begin trading.
• Volatility Shares already had 2x funds available, however, such as BITX and ETHU, which track bitcoin and ether, respectively. These were approved using the same ‘33 Act pathway, Islam said.

Making Waves. The SEC’s decision will likely spur other funds to file for leveraged crypto and commodity products, Islam said. Still, it’s “big news” for Volatility Shares, she added, especially since the firm has so many leveraged crypto products on the market. “We could see more [issuers] follow in the 3x leveraged space, particularly for these crypto products,” Islam said. “There’s a lot of trading demand for them.”

Cash is king, sure, but restricted stock units are also royal in their own regard.

Company stock can represent more than half of total compensation for top executives at publicly traded companies, per data from Northern Trust. Without a plan in place, it can create significant concentration issues and a serious liquidity crunch at tax time. The best outcomes require executives (and their advisors) to look at it as part of the entire household balance sheet, rather than treating salary, equity awards, deferred comp and taxes as separate silos.

“Managing different forms of compensation as part of the broader plan for our corporate executive clients is a mix of art and science,” said Robert Westley, senior vice president and wealth advisor at Northern Trust. “You have to balance a lot of moving pieces.”

Stock Comp Fundamentals

The tax issues involved in equity compensation are fundamentally about when the stock becomes taxable and whether the client has the liquidity needed to pay the bill.

Consider an executive with 10,000 restricted stock units with a three-year vesting period. Generally, taxation occurs only when the stock units vest and the shares are delivered. If the stock stood at $150, for example, the executive would then own $1.5 million of stock. Crucially, however, that $1.5 million is taxable compensation, not a capital gain, meaning the client could face a tax obligation of several hundreds of thousands of dollars.

“The problem is that the executive received stock, not cash,” Westley said. While companies often facilitate automatic “sell-to-cover” or net-share withholding at vesting, executives can face additional constraints when they want to sell shares beyond those needed to satisfy withholding. These include:

• Trading windows and blackout periods.
• Insider-trading restrictions.
• Company stock ownership requirements.

“Even if a stock can technically be sold, there could be reputational concerns about selling,” Westley said. “If the person is really high up in the company, their choice to sell a significant number of shares can spark negative speculation from analysts. They may need to find another source of liquidity.”

None the Richer. A particularly challenging situation arises if shares vest and then fall in value. For example, if an executive recognizes $1 million of equity compensation income in June but the stock falls 30% by December, the subsequent $300,000 decline generally becomes a capital loss, but it isn’t recognized as an ordinary income adjustment. If the executive eventually sells to cover a tax liability, their after-tax wealth can actually fall.

The golden years are getting longer.

Life expectancy in the US hit a record high of 79 years in 2024, ticking up 0.6 years from 78.4 years in 2023 as mortality rates lowered for unintentional injuries, COVID-19 and many chronic diseases, according to the Centers for Disease Control and Prevention. Healthcare companies are making breakthroughs for pancreatic cancer, weight loss, lung disease and more. Scientists are even investigating whether medicine could be used to address aging itself.

But many people are worried about affording those extra years. Roughly four in 10 Americans aren’t confident today’s retirement planning methods adequately account for longer lifespans, according to a recent report from TIAA. When asked about the financial challenges of living longer, people’s top concerns were affording day-to-day living expenses, enjoyment in those bonus years and long-term medical care.

“Longevity risk planning has always been a key part of a good retirement plan,” said John Bell of Free State Financial Planning. “Medical advances like GLP-1s seem like one more reason to plan for a long life rather than banking on not outliving your money.”

Shelf Life Extended

When it comes to planning for longer lives, reshuffling investments often isn’t the answer:

• Having clients decide what the money is for — where they’ll live, what their expenses look like, what their goals are and what, if anything, they want to leave behind is the starting point, Bell said. Then, he “stress-tests” whether the current plan would work if someone lives longer, like to 100 instead of 90. “The levers that move the needle are things like spending flexibility, when to claim Social Security, Roth conversions in the low-income years and whether a vacation house, moving or downsizing still fits the plan,” he said.
• Clients also need to be convinced to save for a potentially longer life. Many are resistant to that, as they don’t understand that they’re not “average,” Silverling Financial owner Michael McMeans said. Simple things like good dental hygiene, walking regularly and strong healthcare can put your life expectancy well above average, he noted.

Debunked. Another misconception clients have about longevity is that they’ll save up, then spend down, McMeans said. But usually, they save up, live off the top, allow the base nest egg to grow and help their income stream keep pace with inflation, he said. “As a result, whether they live a long time or not, there will be assets at their deaths, and probably a good deal amount more than they expect.”