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The BD/IA Regulator Providing securities regulatory, enforcement and litigation trends for broker-dealers, investment advisers and investment funds

Tag Archives: ETF

SEC Gives the Nod to Exchange-Traded Mutual Funds

Posted in Investment Adviser Regulation

Barely two weeks after it signaled thumbs-down on two requests to approve non-transparent exchange-traded funds (ETFs), the SEC on November 6, 2014 published a notice of application that would allow the applicant to create “exchange-traded mutual funds,” or ETMFs, a novel structure that is a hybrid between mutual funds and traditional ETFs. ETMFs feature characteristics… Read More

SEC: Non-Transparent ETFs Not Ready for Prime Time

Posted in Fund Regulation

The SEC has given a preliminary thumbs-down to non-transparent exchange traded funds (ETFs).  In two separate notices issued on October 21, 2014, (found here and here), the Commission stated that applications to allow actively managed ETFs to withhold daily disclosure of portfolio holdings did not “meet the standard for exemptive relief” under Section 6(c) of… Read More

ETF Mergers Possible Under Rule 17a-8

Posted in Fund Regulation

Can two affiliated ETFs merge in reliance on Rule 17a-8 under the Investment Company Act despite representations they made to obtain exemptive relief from the Commission?  That’s the question addressed in a recent Guidance Update from the Division of Investment Management. Among the standard representations required by the SEC to grant exemptive relief necessary to… Read More

Court Tosses ETF Securities Lending Fee Case

Posted in Fund Regulation, Private Litigation

A federal district court in Tennessee dismissed a case brought by two union pension funds claiming that securities lending fees paid by an ETF to its adviser’s affiliate violated  the adviser’s fiduciary duty under Section 36(b) of the Investment Company Act of 1940 (“1940 Act”). The defendants argued that the SEC issued an order exempting… Read More

Please Mr. Postman: FINRA Cracks Down on Late Prospectus Delivery

Posted in Broker-Dealer Regulation, Enforcement, FINRA Enforcement

FINRA has been engaged in a “stealth sweep” of firms’ untimely deliveries of mutual fund and ETF prospectuses that has resulted in formal disciplinary proceedings against twelve firms since 2011, and a total of over $5 million in fines.  Oddly, FINRA has not posted the “Targeted Examination Letter” that initiated the sweep, has not issued… Read More

Court of Appeals Upholds Dismissal of Case Alleging Disclosure Violations by Leveraged ETFs

Posted in Fund Regulation, Private Litigation

The U.S. Court of Appeals for the Second Circuit upheld the dismissal by a lower court of investors’ claims that certain ETF prospectuses failed to adequately disclose the risk of significant losses over an extended period of time. In a July 22, 2013 decision, the court dismissed claims against officers and directors of ProShares Trust… Read More