SEC Proposes Changes To ETF Approval Process

The SEC proposed a new rule that would modify the approval process for certain exchange-traded funds ("ETFs").

Under proposed Investment Company Act Rule 6c-11, open-ended ETFs would be able to come to market without applying for an exemptive order. Certain ETFs would not be able to rely on the rule, including ETFs organized as unit investment trusts ("UITs"), leveraged ETFs, inverse ETFs and ETFs organized as a share class of a multi-class fund.

ETFs that qualify for the exemptive rule would be required to meet certain conditions, including:

• posting daily portfolio transparency information on their websites;
• using custom baskets only after adopting adequate written policies and procedures;