Unique Views into the Regulation of Asset Management. 198 0 obj <>/Filter/FlateDecode/ID[<364C914AE2D1B04BB5BD1E94A229ED41>]/Index[163 71]/Info 162 0 R/Length 143/Prev 208156/Root 164 0 R/Size 234/Type/XRef/W[1 3 1]>>stream It would not be available for leveraged-ETFs or ETFs formed as unit investment trusts (“UITs”). The US Securities and Exchange Commission (SEC) unveiled in final form the regulatory framework that will govern the operation of most exchange-traded funds (ETFs) going forward. in certain limited circumstances, pay authorized participants the proceeds from the redemption of shares in more than seven days. �BH_�H�&���0��F�� ��(�L�9L�`�x �o�G&����>b`����� �T� h�b```����B ���������a�6��S�`�c�@w��Sˎ�l � L@� W�Lw���"��Ebu�p�z�6A����ٖ݊���-� L��5vr�/0]a4c�ΐΠ� � ``� ���#�ƿ�c�r`��b`�` ��� �fd`�R|���`.�� �_+O Comments on Proposed Rule: Exchange-Traded Funds [Release Nos. The ETF Rule Proposal: Key Takeaways. redeem shares only in creation unit aggregations; permit ETF shares to be purchased and sold at market prices rather than at net asset value (“NAV”) per share; engage in in-kind transactions with certain affiliates; and. Proposed rule 6c-11 would permit ETFs that satisfy certain conditions to operate within the scope of the Investment Company Act of 1940 (the “Act”), and come directly to market without the cost and delay of … “We … S7-15-18] 33140 (June 28, 2018) [83 FR 37332 (July 31, 2018)] (“2018 ETF Proposing Release”). The ETF Rule would require an ETF to disclose its portfolio holdings that will form the basis for the calculation of its NAV per share as of the close of business on the prior business day. Growth in U.S. ETF assets could receive a boost from planned rule *As of June 26 Clayton has made passing an ETF rule a priority since he took the helm at the SEC in May 2017. h�̛k�\����J������; Support for Proposed Rule 6c-11 We are very supportive of the Proposed Rule. Proposed Rule 6c-11 would codify much, but not all, of the Relief contained in existing exemptive orders granted to ETFs to operate as ETFs (“Prior ETF Orders”). While they considered different treatment for passive ETFs (with specific data disclosure rules around tracking error being touted for passive funds), the SEC decided against it. 7 See Exchange-Traded Funds, Investment CompanyAct Release No. Officials from the U.S. Securities and Exchange Commission met with the twins on Feb. 14 to discuss their proposal for an ETF based on the digital currency, according to a … Rule 6c-11 will permit ETFs that satisfy certain conditions to operate within the scope of the Investment Company Act of 1940 (the “Act”), and come directly to market without the cost and delay of obtaining an … The SEC has proposed new a new rule that would make it easier for leveraged and inverse ETFs to come to market. Since 1992, the SEC has issued more than 300 exemptive orders allowing for the launch of more than 2,000 ETFs. Despite ETFs growing to $3.4 trillion in total net assets, the exemptive order application process can be slow and expensive for ETFs. In 2015, the SEC re-issued a request for public comment on the need for and the construction of a new ETF rule proposal. ETFs have become enormously popular in the investment company industry. 163 0 obj <> endobj If the proposal becomes the rule, asset managers will be able to bring to market certain types of ETFs without first gaining the SEC’s explicit approval. The Asset Management ADVocate provides unique analysis and insight into legal developments affecting asset managers in the United States. The proposed rule would provide an updated and more … Proposed Rule 6c-11 (the “Proposed Rule”) would impose a more streamlined process for new ETFs, and create more standardized compliance requirements for existing ETFs. =��>��NO�v�w��>�f���7������v�������.��ˍ�������������\~�l����ջ��O�y����϶�~x������7��y��?��e���'��*��3�v����?�^}���O�������W�/_����W7ׇǏo~\?�9Yg��t;k�����k}�����g����^�S�}��?_��o����Ͼ~�[���wV��p�?��~.�����,ۧ���W/]�z��,�g����nj�CW ��z{����m�#�f�~|�nO��e~z���^��ư�����n�~��˷۹��'ϵHAq�K��y��? The proposed rule and rule amendments (collectively, the “ETF Rule”) would substantially replace the current regime under which each ETF sponsor is required to obtain, and subsequently rely upon and comply with, its own individual exemptive relief from certain provisions of the 1940 Act in order to offer and operate an ETF. endstream endobj 164 0 obj <>/Metadata 12 0 R/Pages 161 0 R/StructTreeRoot 24 0 R/Type/Catalog>> endobj 165 0 obj <>/MediaBox[0 0 595.44 841.68]/Parent 161 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/StructParents 0/Tabs/S/Type/Page>> endobj 166 0 obj <>stream 24The Proposed Rule defines an “authorized participant” as “a member or participant of a clearing agency registered with the [SEC], which has a written agreement with the [ETF] or one of its service providers that allows the authorized participant to place orders for the purchase and redemption of creation units.” Rule 6c-11(a). The Rule permits all ETFs eligible to rely on it to utilize custom purchase and redemption baskets (i.e., baskets composed of a non-representative selection of the ETF’s holdings OR any basket that differs from any other basket used by the ETF that day). This broad experience, combined with senior-level attention, provides the knowledge, skill and sophistication to help our clients navigate complex regulations and manage their business operations and investments. Between 2007 and 2018, the median processing time from filing to approval was 221 days. According to the Adopting Release, the Final Rule defines an ETF as a “registered open-end management investment company that: (i) issues and redeems creation units to and from authorized participants in exchange for a basket and cash balancing amount (if any), and (ii) issues shares that are listed on a national securities exchange and traded at market … September 27, 2019. The Commission voted to adopt a new rule and form amendments designed to modernize the regulatory framework for exchange-traded funds (“ETFs”). The SEC also estimates that the cost for a typical ETF filing for exemptive relief is $100,000. The Commission is proposing a new rule and amendments to forms designed to modernize the regulatory framework for exchange-traded funds (“ETFs”). In the meantime, check back here for additional analysis of the Proposed Rule. Currently, ETFs are generally subject to the 1940s Securities Act with exemptive orders to handle certain ‘ETF-specific’ characteristics, The SEC ruled that there will be no differentiation in the rule set between active and passively managed ETFs. According to footnote 210 of the proposal, an ETF would not be permitted to reflect portfolio changes on anything but a T+1 basis. In addition, the Proposed Rule would rescind the exemptive orders for any existing ETF that would fall within the scope of the Proposed Rule. If adopted as proposed, the proposed rule would significantly alter the regulatory landscape for ETFs and level the playing field for both existing ETF sponsors and new entrants in the ETF market, as … 8 Proposed rule 6c -11 did not include ETFs that: (i) are organized as UITs; (ii) seek to exceed the performance of a market index by a specified multiple or to provide returns that have an inverse New proposals from the U.S. securities watchdog aimed at reducing risks in exchange-traded funds (ETFs) may end up being the best thing that ever happened to rival exchange-traded notes (ETNs). %PDF-1.6 %���� Michael Sapir, chairman of ETF manager ProShares, said the proposed rule could lead more advisers to stop selling leveraged ETFs altogether. On June 28, 2018, the U.S. Securities and Exchange Commission (“SEC”) proposed a new rule for exchange-traded funds (“ETFs”). On Thursday, June 28, the US funds industry welcomed the SEC’s proposed ETF regulation, representing a seismic positive shift for both incumbent and prospective ETF issuers. In addition, the Proposed Rule would rescind the exemptive orders for any existing ETF that would fall within the scope of the Proposed Rule.ETFs that meet the Proposed Rule’s specific conditions would: 1. re… It does not apply to ETFs structured as Unit Investment Trusts (UITs), ETFs structured as a share class of a mutual fund, levered and inverse ETPs, or non-transparent actively managed ETFs. The SEC had originally proposed a rule codifying its exemptive order conditions in 2008. 33-10515, IC-33140; File No. We believe the proposal is thoughtful and will benefit ETF investors and the ETF ecosystem. BlackRock submitted a detailed comment letter in response to the proposed Rule 6c-11 in September 2018. 28 January 2019 Sam Barber. h�bbd```b``��5 �i�T�"��H�c �EL�����,0�lB����3���Ƃ�!�`3;��Mc The ETF Rule Proposal: Key Takeaways. This is the first in a series of posts on the new Proposed Rule, its requirements, and next steps for the Proposed Rule. SEC Proposes New ETF Rule June 29, 2018 The new rule would permit ETFs to operate without the need to obtain individual exemptive orders from the US Securities and Exchange Commission. Interactive calculator . Our Investment Management practice attorneys represent participants in all aspects of the dynamic investment management industry. The Proposed Rule contains the following five core conditions that if met, would allow for an ETF to take advantage of the relief outlined above: The Proposed Rule does not include several ETF-related issues that current exemptive orders have included or addressed: Comments on the Proposed Rule are due October 1, 2018. ET. %%EOF In the coming months the SEC is planning to launch the ‘ETF Rule’ (6c-11), which will bring a purpose built regulatory framework to the ETF industry. �day��a"u��a����S$�{FR��@�B�sؼ�"Y�*��6��/�&D�ܦf��&�wظ��W)R���R�I�L���J�U���5��k*EM��BIO�J�i��*F��g#� ����ZД�ǜ�Rb�bu������_L^c��efᗫ������O��z�̨��|aT�w��B���U The SEC’s proposal seeks to create a consistent, transparent, and efficient regulatory framework for ETFs and to facilitate greater competition and innovation among ETFs. 0 The SEC’s proposed rule 6c-11 (under the 40 Act) seeks to address this problem by harmonizing requirements for all ETFs structured as open-ended investment companies. /J�'��. In 2008, the SEC proposed a rule that would have applied to index-based ETFs and codified certain standard conditions, but it was never finalized in the midst of the economic downturn. Scope and Relief of Proposed Rule 6c-11The Proposed Rule would be available to ETFs that are organized as open-end funds, including both index-based and actively managed ETFs. As proposed, the rule effectively eliminates any meaningful distinction between index and active ETFs, and this is a good thing. It would not be available for leveraged-ETFs or ETFs formed as unit investment trusts (“UITs”). Perkins Coie Attorneys Contribute to the ABA’s Digital and Digitized Assets: Federal and State Jurisdictional Issues White Paper, Updated SEC Definition Opens Private Markets to (a Handful of) New Investors, SEC Adopts Amendments to Expand Accredited Investor Definition, FINRA Repeats Warnings of Imposter Websites, As Pandemic Lingers, SEC Has Not Forgotten About Advisers’ Share Class Selection and Compensation Practices. 233 0 obj <>stream Notably, the distinction between open-ended funds and UITs – which is substantially a matter of fund governance – means that many of the oldest and most established products are actually not … The Proposed Rule would be available to ETFs that are organized as open-end funds, including both index-based and actively managed ETFs. Thus, under the proposed rule, an ETF’s premium/discount is the difference between NAV and the ETF shares’ official closing price or the midpoint of the NBBO at, typically, 4:00 p.m. endstream endobj startxref That version of a rule was never adopted. Our comments are of a technical nature, intended to improve the proposal and ensure it aligns with current best practices in the ETF industry. [10] Proposed Amendments to Form N-1A The Proposing Release also proposes amendments to Form N-1A for both mutual funds and ETFs. The Rule eliminates the proposal to require examples in an ETF’s prospectus showing how bid-ask spreads would impact the return of a hypothetical investment. The SEC blessed the first ETF in 1992, and since then, the SEC has issued over 300 ETF exemptive orders. The New ETF Rule: Initial Impressions. ��� (m�|]֒4��o�2ڋ���vyS6)�M]km�,Dw���kHF�֠�T� U��a�@�jÅT`=�:Y�W����.�M(6}P��)�帬Td}�h U�6�z�JSQO;u��q�(�w�����U����uNk��fdY5�WYV}nW��W�Uv%nD�V��FD�R�kE���i��v�%/}��,�v�mZoiQ��@��ٵ�ic��X�\.��I|ƶ�9���i\u��~�.�������f����l�Ԧ1��~�����cXSl;�jp8�x���L.-v�I;[�}Sŏh�ڷP�B�f�.�v.kn��ʡo;���NkՑ�2�/�k�{S"p��c�]e��K�W᪷sq�`7�&��J;�s��������l=�!s��j2#�&�}�r�}���}G[���8���o���yǹC�l�ak=� 8����l��t>>�>���k�,��rt���y��~�����pN�4qo������?`��"�G���K�{x|�����;�����7��`:�ds�M��iI�]m]�����.� ���x����t2��~��"���X�X["�;�/�Q�/k�]� The Securities and Exchange Commission has voted to propose a new rule designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds (ETFs) and closed-end funds, as well as business development companies. The Proposed Rule is not meant to be exclusive, therefore the SEC will continue to consider applications for new ETFs that cannot satisfy the Proposed Rule’s requirements. ETFs that meet the Proposed Rule’s specific conditions would: Conditions for Reliance on Proposed Rule 6c-11. [1] Rule 6c-11 (Rule) under the Investment Company Act of 1940 (1940 Act) is designed to modernize the regulation of ETFs, whose … The Rule eliminates the proposal to require an interactive calculator on an ETF’s website allowing an investor to customize hypothetical bid-ask spread calculations. �l���-�֢Z�i��j�"�D/����q���5Ǥ���mW���c�I�����,���%��5�Ϗ�������uF� ?����B�;�1�#��� �·P�=T��������N�Uj1���}>��{#,��፴��ul&'�.&�J��t.z������X�.�E�e�1���4I��)�2g~G��;S=�K� Rule would etf rule proposal available for leveraged-ETFs or ETFs formed as unit investment trusts ( “ UITs )... Than 300 exemptive orders allowing for the launch of more than seven days ETF filing for exemptive relief $! 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