Exemptive Order Requirement On ETFs May Finally See The Light Of Day

“A stalled proposal hammered out last year to permit exchange traded funds to operate without having to obtain individual exemptive orders may finally see the light of day sometime within the next few months,” David Hoffman Reports From Investment News.

“It’s clearly something we would like to move forward on,” Andrew J. “Buddy” Donohue, director of the SEC’s division of investment management, said today in Phoenix at the Investment Company Institute’s Mutual Fund and Investment Management conference.

Hoffman goes on to say, “In disusing the proposed rule, however, he let slip concerns he had with the ETF structure. Specifically, Mr. Donohue said he was concerned authorized participants – those responsible for buying or selling shares of an ETF directly from the fund’s manager to ensure its intraday market price approximates to the net asset value of the underlying assets – could benefit from inside knowledge they possess at the expense of retail investors.”

“That wasn’t a concern as long as long as ETFs traded in line with their NAV, but it is a potential problem when an ETF deviates from its NAV, Mr. Donohue said. ETFs generally trade in line with their NAVs, but a number of funds traded at persistent premiums or discounts during the recent market downturn,” Hoffman Reports.

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