On May 20, 2019, the Securities and Exchange Commission (SEC) granted exemptive relief under the Investment Company Act of 1940 for Precidian Investments’ non-transparent actively managed exchange-traded funds (ETFs). The exemptive relief permits registered open-end investment companies that are actively managed ETFs to operate without being subject to the current daily portfolio transparency condition in actively managed ETF orders. The SEC rejected Eaton Vance’s contention that the operation of the ETFs as described in the exemptive application (ActiveShares ETFs) would involve unlawful trading on material nonpublic information by broker-dealers in violation of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
The SEC’s decision ends Eaton Vance’s tenure as the only provider of actively managed non-transparent ETF-like products through its “NextShares” design. One day after the SEC’s decision, American Century – one of ten ActiveShares licensees that include JPMorgan and BlackRock – filed for ETFs built on Precidian’s model.