The SEC has adopted a new rule (6c-11) that will allow the creation and distribution of exchange-traded funds without having to obtain specific exemptive relief from several provisions of the Investment Company Act. The rule applies to open-end funds that provide daily portfolio transparency and includes conditions common to most ETF exemptive orders concerning holdings, disclosure, and pricing. The SEC will rescind individualized exemptive orders for funds that can rely on the new rule. The SEC has issued more than 300 ETF exemptive orders since 1992, allowing for the launch of approximately 2,000 ETFs with over $3.3 Trillion in assets. The rule becomes effective 60 days after publication.
If this rule were the only legacy of the Clayton/Blass SEC, we would consider it a success. This rule is long overdue and should level the playing field for smaller ETF sponsors burdened with the expense of obtaining exemptive relief.