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SEC Lowers Barriers to ETFs

Earlier this month, Norm Champ, director of Investment Management Division at SEC, stated that the commission is considering eliminating regulatory barriers to launching certain types of exchange-traded funds. During the Reuters Global Wealth Management Summit, Mr. Champ explained that the SEC is moving to lower barriers to ETFs by simplifying procedures to approving “plain vanilla” ETFs and giving new ETFs “exemptive relief” from requirements of the 1940 Investment Act.

Following Mr. Champ’s remarks, the SEC said this week that it planned to drop several requirements to make self-indexing easier for ETF sponsors’s requests. According to a recent Financial Times article, some of the largest ETF sponsors such as BlackRock and State Street Global Advisors requested approval to use their own affiliated indexes for their products. In response, the SEC said it is prepared to drop requirements for “index transparency and third-party involvement in calculating the index in exchange for the ETF sponsor to fully disclose portfolio holdings daily.” Unless there are objections raised by July 9 from the public regarding the ETF sponsors’ request, the SEC will approve their request.