The SEC proposed a new rule that would modify the approval process for certain exchange-traded funds ("ETFs").
Under proposed Investment Company Act Rule 6c-11, open-ended ETFs would be able to come to market without applying for an exemptive order. Certain ETFs would not be able to rely on the rule, including ETFs organized as unit investment trusts ("UITs"), leveraged ETFs, inverse ETFs and ETFs organized as a share class of a multi-class fund.
ETFs that qualify for the exemptive rule would be required to meet certain conditions, including:
The proposal would rescind previous exemptive relief for ETFs that are able to rely on the rule. The SEC recommended preventing the creation of new ETFs organized using a "master-feeder" structure.
The SEC also proposed amending disclosure obligations for funds organized as UITs.
The SEC will accept comments on the proposal for a period of 60 days after it is published in the Federal Register.