On Sept. 25, 2019, the SEC adopted Rule 6c-11 under the Investment Company Act of 1940, as amended (“1940 Act”). The new rule allows sponsors of exchange-traded funds (“ETFs”) to launch and operate ETFs without first obtaining individual exemptive orders from the SEC. Subject to satisfying certain conditions, the rule provides for blanket exemptive relief from sections of the 1940 Act and other securities laws for many, though not all, ETFs that are structured as open-end investment companies. The adoption of the rule will streamline the process for establishing new ETFs and will level the playing field among ETFs subject to the rule by establishing consistent conditions that must be met by such ETFs. While certain types of ETFs, including those structured as unit investment trusts (“UITs”) or operating as inverse or leveraged ETFs, will still require exemptive relief, the new rule provides the opportunity for many new ETFs to launch more quickly and less expensively than in the past.
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