Barely two weeks after it signaled thumbs-down on two requests to approve non-transparent exchange-traded funds (ETFs), the SEC on November 6, 2014 published a notice of application that would allow the applicant to create “exchange-traded mutual funds,” or ETMFs, a novel structure that is a hybrid between mutual funds and traditional ETFs.

ETMFs feature characteristics

The SEC has given a preliminary thumbs-down to non-transparent exchange traded funds (ETFs).  In two separate notices issued on October 21, 2014, (found here and here), the Commission stated that applications to allow actively managed ETFs to withhold daily disclosure of portfolio holdings did not “meet the standard for exemptive relief” under Section 6(c)

Can two affiliated ETFs merge in reliance on Rule 17a-8 under the Investment Company Act despite representations they made to obtain exemptive relief from the Commission?  That’s the question addressed in a recent Guidance Update from the Division of Investment Management.

Among the standard representations required by the SEC to grant exemptive relief necessary to

FINRA has been engaged in a “stealth sweep” of firms’ untimely deliveries of mutual fund and ETF prospectuses that has resulted in formal disciplinary proceedings against twelve firms since 2011, and a total of over $5 million in fines.  Oddly, FINRA has not posted the “Targeted Examination Letter” that initiated the sweep, has not issued

The U.S. Court of Appeals for the Second Circuit upheld the dismissal by a lower court of investors’ claims that certain ETF prospectuses failed to adequately disclose the risk of significant losses over an extended period of time.

In a July 22, 2013 decision, the court dismissed claims against officers and directors of ProShares