The world’s biggest exchange-traded fund tracking oil is facing U.S. regulatory action after it took a series of extreme steps to survive the historic crude selloff earlier this year.
The Securities and Exchange Commission has issued the United States Oil Fund ETF, known as USO, a Wells Notice about the intended measures, according to a filing on Wednesday.
The fund was being probed over whether it had adequately disclosed risks to investors after it was forced to dramatically reshuffle the mix of futures contracts it tracked during the market turmoil. That helped protect the ETF, but meant deviating from its past investment strategy.
The notice states that the SEC has made a preliminary decision to recommend an enforcement action against the ETF, its Chief Executive Officer John Love and United States Commodity Funds, the company which manages USO. The decision relates to disclosures made in late April and early May.
USCF, USO and Love said they intend to vigorously contest any allegations. Judy Burns, an SEC spokesperson, declined to comment.
It’s the latest dramatic twist in the story of USO, which was at the center of the storm as crude prices plunged earlier this year. As volatility swept the market, it issued six disclosures in less than two months announcing changes to the fund’s investment strategy, and temporarily halted new share creations — potentially untethering itself from the contracts it was tracking.
Despite the drama, the ETF remains a major player in oil futures with more than $4 billion in assets. Industry experts say the SEC notice is unlikely to change that.