SEC releases guide in response to consumer calls

The Securities and Exchange Commission (SEC) has recently released a certificate of deposit (CD) guide in response to consumer calls for authentic outlines.

SEC, in its guide, clarifies at the onset that consumers must not automatically go for attractive CD rates which initially offer high yields. The commission says that there might be different and specific types of CD for each individual. According to SEC, these CDs may not necessarily have high yields but can be far less risky.

Financial Analyst Anne Peritonea related that what SEC particularly wanted consumers to consider was a carefully understood CD disclosure statement. She said that without such precondition, then any consumer might not find it a good idea to purchase a CD. Peritonea stresses that whenever a consumer asks for CDs, research must also be done in order to check a bank’s track record in attaining the best results for the clients.

In the SEC outline, the first written consideration is one’s financial plan. Peritonea said that this is of course important especially when one is making a major, or a first-time decision to invest. Especially for the inexperienced financial product consumers, Peritonea said that a financial plan will be a good starting point.

SEC said that one’s financial situation should be the primary consideration in purchasing financial products or in making investment decisions. Goals to be achieved and the risks that accompany these goals, according to Peritonea, should better be addressed at the onset. Otherwise, no financial plan can be possible.

The commission then listed the following to be part of the considerations in making a financial plan: the cash equivalents of the certificate of deposit, money deposit accounts, money market funds, savings deposits and treasury bills. With all these things needing attention, the risk of inflation must then have a way of being mitigated, Peritonea added.

SEC, however, warned that the inflation risk has also been the major concern for many people who opted to invest on CD in the previous years. SEC shared that those who bought their CDs in the past complained of the inflation risk which increased much faster than the returns they expected from their investments. And with CD rates declining, many investors fear that their investments will amount to nothing by the time it matures.

Peritonea said that it’s important to pay the most attention to this first step of making a financial plan as given by the Securities and Exchange Commission in their guide. She concludes that this is the determinant for the success or failure of any consumer’s purchase of a financial product or investment.