SEC Adopts Rule Modernizing ETF Regulations

WHAT HAPPENED?

On Sept. 26, 2019, the Securities and Exchange Commission voted to adopt Rule 6c-11. The goal of the rule is to create a clear process to establish and operate exchange traded funds (ETFs) and to facilitate competition in this market.

In the past, it was required to obtain exemptive relief to bring an ETF to market, as they were originally not allowed under securities laws; with the new rule, creating and operating an ETF will become more efficient. In addition to streamlining the process for starting an ETF, there are several new conditions and requirements. These include certain disclosures and portfolio information displayed on fund websites and amendments to several forms, including Forms N-1A and N-8B-2.

Currently, there are over 2,000 operating ETFs with approximately $3.3 trillion in total assets. Most types of ETFs will be required to rely on the rule. Exemptive relief with be rescinded from funds operating under such conditions at this time.

WHAT DOES THIS MEAN FOR ME?

Firms currently operating ETFs impacted by the rule have one year from the rule’s effective date to come into compliance with the provisions.

With the new ease and accessibility of starting a fund, the market is likely to see an increase in ETFs in 2020 and beyond. We are committed to providing ongoing, comprehensive compliance support and can offer additional insight into potential effects of the rule. Contact Fairview with questions about how Rule 6c-11 may impact your firm.

By | 2019-10-24T20:09:16+05:00 Oct 24th, 2019|Fairview® Flash Reports, U.S. Securities and Exchange Commission|

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