Section 11(d) Relief on Marketing ETFs

The SEC granted a request for relief from Section 11(d)(1) of the Securities Exchange Act of 1934 with respect to extensions of credit on ETF shares by Charles Schwab & Co., Inc. The SEC confirmed that Schwab could extend margin credit on the ETF shares in spite of the fact it had certain (very limited) business relationships with persons involved in the distribution of the shares. The relationship between Schwab and the ETF providers existed essentially to allow Schwab to hold conferences with respect to ETFs and would not have resulted in any direct cash compensation to Schwab. In effect, although without saying so, the letter concludes that the relationship between Schwab and the ETF provider does not rise to a level whereby Schwab should be deemed to be participating in a distribution of the ETF shares.

Cross-Reference(s): Exchange Act Sec. 11(d)(1); NASD Rule 2830(1)(5)(C)(i); Lofchie's Guide to Broker-Dealer Regulation:Margin Chapter (Section X of the Chapter provides a detailed discussion of Section 11(d)).

View letter in full here (links externally to SEC website).