SEC Issues ETF Rule Proposal

October 01, 2018
The Investment Lawyer

The Securities and Exchange Commission (SEC) is proposing to simplify and modernize the regulatory framework governing exchange-traded funds (ETFs) and enhance information to investors about the costs of purchasing ETF shares. If adopted, the proposal would, among other things: (1) allow most ETFs to operate without rst obtaining exemptive relief by relying on a proposed new rule; (2) provide greater exibility with respect to aspects of ETF operations than exists under exemptive relief issued in recent years, including the use of “custom baskets” for creation and redemption transactions; and (3) require additional disclosures regarding ETFs’ trading costs, including certain bid-ask spread information. The SEC’s proposal also would rescind existing exemptive relief for those ETFs that are eligible to rely on the proposed rule.

The SEC unanimously voted to propose new Rule 6c-11 (Proposed Rule) under the Investment Company Act of 1940 (1940 Act), as well as certain form amendments, designed to simplify and modernize the regulatory framework governing ETFs and enhance information provided to investors about the costs of purchasing ETF shares (Proposal). Comments on the Proposal are due October 1, 2018.

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