SEC Adopts New Rule for Exchange-Traded Funds

October 1, 2019

On September 25, 2019, the SEC adopted Rule 6c-11 (Rule) under the Investment Company Act of 1940, as amended (1940 Act), to modernize the regulatory framework for most exchange-traded funds (ETFs).  The Rule eliminates the need for ETFs that can operate under its conditions to obtain an exemptive order from the SEC.  In a concurrent release, the SEC issued an exemptive order under the Securities Exchange Act of 1934, as amended (1934 Act) providing relief from certain requirements of the 1934 Act and related rules for ETFs that rely on the Rule and broker-dealers (who may be authorized participants) engaging in transactions with the ETFs’ shares.  The SEC also adopted form amendments that would expand disclosure obligations for all ETFs.

The Rule and related form amendments will become effective 60 days from publication in the Federal Register, and the compliance date for the form amendments will be one year from this effective date.  Most ETF exemptive orders granted by the SEC prior to the Rule’s adoption will be automatically rescinded one year after the Rule’s effective date.  Therefore, ETFs relying on those orders will be required to comply with the Rule to continue operating as ETFs after this one year period.  The Rule’s adopting release highlights several notable changes to the Rule since it was proposed, which arose from industry comments to the proposal.  The final rule release, the SEC’s press release and fact sheet covering the Rule’s adoption and exemptive order issued under the 1934 Act are available at the links below:

This Seward & Kissel memorandum describes the Rule and related amendments in greater detail:


Exchange-Traded Funds (ETFs), Investment Companies, Regulatory