Dechert Submits Comment Letter to SEC in Response to SEC’s Proposed Rule 6c-11

September 28, 2018

Dechert submitted this comment letter to the Securities and Exchange Commission (“SEC”) in response to the SEC’s June 2018 proposed Rule 6c-11 and amendments to existing rules and forms (“Proposal”) under the Investment Company Act of 1940.  The Proposal is intended to simplify and modernize the regulatory framework governing exchange-traded funds (“ETFs”) and enhance information provided to investors about the cost of purchasing ETF shares.  Dechert strongly supports the SEC’s goals and has provided comments and suggestions regarding several elements of the Proposal, including, among others, that:

  • Rule 6c-11 explicitly permit “T-1 Orders”;
  • Rule 6c-11 be clarified to ensure ETF sponsors have additional flexibility with respect to their use of custom baskets;
  • Fund of funds relief be granted concurrently with the effectiveness of Rule 6c-11;
  • The SEC create uniformity for existing relief under the Securities Exchange Act of 1934;
  • Exchange listing standards and the 19b-4 process be applied in a consistent manner;
  • Rule 6c-11 define all ETF shares as “redeemable securities”;
  • The “sunset provision” included in Rule 6c-11 relating to the relief from Section 22(e) be removed;
  • Exemptive relief permitting ETFs to operate in a master-feeder structure not be rescinded;
  • Affiliated broker-dealers of an ETF’s adviser be allowed to transact in kind with the ETF;
  • The two percent cap on ETF redemption transaction fees be eliminated; and
  • The SEC consider moving to a more uniform, standardized approach in determining whether to grant exemptive relief for non-fully transparent ETFs.