The Risky Funds Ringing Alarm Bells in 2014

Alamy Brokers prodding individual investors into putting their money into certain key kinds of riskier assets are facing a crackdown from U.S. authorities. Frontier funds, which focus on up-and-coming emerging markets, and complicated, higher-risk products like exchange-traded funds and mortgage-backed securities are among the products in the firing line of the Financial Industry Regulatory Authority, the U.S. regulator of securities firms. "Heightened risks associated with investing in foreign or emerging markets generally are magnified in frontier markets," Finra warned. Rising interest rates are also worrying the regulator. A hike in interest rates, which were cut drastically then held at historically low levels by central banks like the U.S. Federal Reserve and the European Central Bank after the credit crisis, is looking more likely as markets return to normal. Finra is now targeting those selling interest rate sensitive securities like mortgage-backed securities, the controversial investment products which were partly credited with fueling the credit crisis. Finra outlined its priorities for investigation in its annual letter to the industry.