On Sept. 26, 2019, the Securities and Exchange Commission (SEC) announced it had adopted a new Rule 6c-11 under the Investment Company Act of 1940 (the “Investment Company Act” or the “Act”). Rule 6c-11 will permit exchange-traded funds (ETFs) that satisfy certain conditions to operate without the expense and delay of obtaining an exemptive order. The new rule is effective 60 days after it is published in the Federal Register. The new rule was proposed in June 2018 after an earlier version of the rule first proposed in 2009 was not adopted.
In connection with the adoption of new rule, the SEC also announced that one year after the effective date of the new rule, prior ETF exemptive relief granted to provide relief related to the formation and operation of an ETF will be rescinded. However, the SEC did indicate that portions of the prior ETF exemptive orders allowing funds to invest in ETFs in excess of statutory limits are not being rescinded, and the SEC will continue to grant similar relief to newly formed ETFs upon application to the SEC. Prior exemptive relief related to unit investment trust (UIT) ETFs, leveraged and inverse ETFs, share class ETFs, and non-transparent ETFs also will not be rescinded, as such ETFs cannot rely on the new rule.