Get ready for more and quicker ETF launches as a result of a new rule from the Securities and Exchange Commission on ETF approval.
Under Rule 6c-11, asset managers will no longer be required to file for exemptive relief under the Investment Company Act of 1940 for each new ETF application, explaining why they were different from mutual funds. They will instead be able to bring new ETFs to market under a single rule so long as the funds satisfy conditions set by the SEC that are intended to promote investor protection.
The rule will take effect 60 days after publication in the Federal Register.
(Related: SEC Issues Long-Awaited Final ETF Rule)
“We’re going to see more ETF launches,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA about Rule 6c-11, in his analysis. “Small asset managers will expand their product lineups and new entrants will seek to join the ETF industry, particularly with thematic offerings.”
The new SEC ETF rule essentially acknowledges ETFs as an investment vehicle separate from mutual funds.
“The entire ETF industry has lived by exception for 26 years,” said Dave Nadig, managing director of ETF.com. ”Now it will live by rule. This just cleans up the status quo and levels the playing field rather than resetting the rules of the game.”