SEC adopts new rules on exchange traded funds

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The Securities and Exchange Commission on Thursday said it would adopt a new rule to modernize how exchange-traded funds (ETFs) are brought to the market and their regulation.

The long-awaited Rule 6c-11 – or the ETF rule as it is more commonly called – is aimed at simplifying rules governing ETFs and seeks to speed up the process of launching new ETFs while reducing associated costs.

Notably, the new rule does away with the exemptive-relief requirement in which would-be ETF issuers had to file with the regulator to get special permission to go around rules outlined in the Investment Company Act of 1940, which did not allow for ETFs.

“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,” SEC Chairman Jay Clayton said in a statement.

Since 1992, the SEC has issued over 300 exemptive orders that allowed more than 2,000 ETFs to exist with more than $3.3 trillion in total net assets, according to data from the commission.

The new ETF rule will replace hundreds of those individual exemptive orders with a single rule.

“The ETF rule will level the playing field for ETF providers, allowing new participants to enter via a streamlined process,” said Elisabeth Kashner, FactSet’s director of ETF research.

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