Mark Uyeda, acting chairman of the Securities and Exchange Commission, said Monday that he's directed agency staff to prioritize review of exemptive orders to allow funds to offer both mutual fund and exchange-traded fund share classes.
To date, the SEC has received over 50 applications from mutual fund and ETF sponsors, collectively representing trillions of dollars in fund assets under management, according to a just-released paper by Ropes & Gray.
Speaking Monday at an Investment Company Institute conference, Uyeda said that more than two years have passed since the most recent set of exemptive relief applications for ETF share classes was filed, and that he's directed commission staff "to prioritize their careful review of the many applications filed for this relief."
Said Uyeda: "The last four years have been marked by an inflexible approach to innovation. We are not merit regulators. Not all products will succeed, but that does not make them inappropriate."
An example, he said, is the ETF market, which "has grown enormously in the last 20 years, covering everything from broad market indexes to niche sectors and alternative asset classes. However, for every three ETFs launched in the last 10 years, one has shut down. In my view, this doesn’t reveal a general concern about ETFs as a product. Instead, this shows the natural process of experimentation, and market forces of supply and demand at play."
ETFs "started through the exemptive application process, and eventually the commission codified certain conditions for ETFs to operate without obtaining an exemptive order," Uyeda pointed out, with ETFs now accounting for about 30% of total net assets that investment companies manage.
The SEC share class relief "is expected to allow a mutual fund to offer a class of ETF Shares (in addition to one or more classes of Mutual Fund Shares) and an ETF to offer one or more classes of Mutual Fund Shares (alongside a class of ETF Shares)," Ropes & Gray said.
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