SEC’s Uyeda Pushes ETF Share Class Review as Requests Grow
A study found that 51 applications to create ETFs from mutual funds are pending.
Reviews of applications that would permit easier creation of ETFs from mutual funds are piling up and should be expedited, the Securities and Exchange Commission acting chairman said Monday.
The SEC has received 51 applications for so-called exemptive relief from rules that allow the creation of exchange-traded funds from mutual funds, according to a study by Washington, D.C., law firm Stradley Ronon. Those applications have piled up over the past few years and have come from companies including BlackRock, Morgan Stanley, Dimensional Fund Advisors, F/M Investments and others.
Issuers Aim to Carve ETFs from Mutual Funds
Mutual fund issuers are aiming to carve ETFs from mutual funds after The Vanguard Group's exclusive patent that permitted it do so expired in 2023. Despite dozens of applications, none have been approved.
The exchange-traded fund industry has been taking market share from mutual funds over the past few years due to ETFs' ease of trading, lower costs and certain tax benefits. As a result, mutual fund issuers have been converting funds into ETFs and seeking exemptive relief to permit the creation of share classes from mutual funds.
In calling for an accelerated review of the exemptive relief applications, SEC Acting Chair Mark Uyeda said markets require innovation to move forward, taking aim at the Biden administration for having what he called an “inflexible approach to innovation.”
“I have directed the Commission staff to prioritize their careful review of the many applications filed for this relief, and I look forward to considering their recommendations,” Uyeda said in remarks to the Investment Company Institute’s 2025 Investment Management Conference in San Diego.
ETF Share Class Relief
Issuers are pushing for exemptive relief that would allow them create ETFs from their mutual funds, essentially offering exposure to the same portfolio holdings in either a mutual fund or ETF.
“I expect the (SEC) staff to identify key conditions, communicate that to the industry and allow applicants to agree to those conditions and move forward with the relief,” Stradley Ronon partner Brian Murphy said in an interview. "Over the past two years, progress on ETF share class relief has been slow, however Uyeda’s comments yesterday suggest progress will come much more quickly in the next few months."
