8-10 minutes - Source: SEC
“Since ETFs were first developed over 27 years ago, they have provided investors with a number of benefits, including access to a wide array of investment strategies, in many cases at a low cost,” said SEC Chairman Jay Clayton. “As the ETF industry continues to grow in size and importance, particularly to Main Street investors, it is important to have a consistent, transparent, and efficient regulatory framework that eliminates regulatory hurdles while maintaining appropriate investor protections.”
ETFs are hybrid investment products not originally allowed under the U.S.
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The Commission voted to adopt a new rule and form amendments designed to modernize the regulatory framework for exchange-traded funds (“ETFs”). Rule 6c-11 will permit ETFs that
Scope of Rule 6c-11
Rule 6c-11 will be available to ETFs organized as open-end funds, the structure
Conditions for Reliance on Rule 6c-11
Rule 6c-11 will provide certain exemptions from the Act and also impose certain conditions. The conditions include the following:
- Transparency. Under rule 6c-11, an ETF will be required to provide daily portfolio transparency on its website.
- Custom basket policies and procedures. An ETF
relyingon rule 6c-11 will be permitted to use baskets that do not reflect a pro- ratarepresentation of the fund’s portfolio or that differ from the initial basket used in transactions on the same business day (“custom baskets”) if the ETF adopts written policies and procedures setting forth detailed parameters for the construction and acceptance of custom baskets that are in the best interests of the ETF and its shareholders. The rule also will require an ETF to comply with certain recordkeeping requirements. Websitedisclosure. The rule will require an ETF to disclose certain information on its website, including historical information regarding premiums and discounts and bid-ask spread information. These disclosures are intended to inform investors about the costs of investing in ETFs and the efficiency of an ETF’s arbitrage process.
To help create a consistent ETF regulatory framework, one year after the effective date of rule 6c-11 (discussed below), the Commission is rescinding exemptive relief previously granted to ETFs that will be permitted to operate in reliance on the rule. The Commission
Amendments to Form N-1A and Form N-8B-2
The Commission is adopting several amendments to Form N-1A – the form ETFs structured as open-end funds must use to register under the Act and to offer their securities under the Securities Act. These amendments will provide more useful, ETF-specific information to investors who purchase ETF shares on an exchange. The Commission also is adopting amendments requiring that ETFs organized as UITs provide the same information to investors on Form N-8B-2 – the form ETFs structured as UITs must use to register under the Act.
Exemptive Relief and Interpretations Under the Exchange Act
In addition to the rule and form amendments under the Investment Company Act, the Commission is issuing an exemptive order that harmonizes certain related relief under the Exchange Act. In particular, the order provides exemptive relief to broker-dealers and other persons from certain requirements under the Exchange Act with respect to ETFs relying on rule 6c-11.
The rule, form amendments, and related exemptive relief will be published on the Commission’s website and in the Federal Register. All will become effective 60 days after publication in the Federal Register.
The Commission is