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Clearing through the roughly 50 applications in the queue from firms seeking to offer dual share classes of mutual funds and ETFs is at the top of the Securities and Exchange Commission’s to-do list, the agency’s acting chair said.
“I have directed the commission staff to prioritise their careful review of the many applications filed for this relief, and I look forward to considering their recommendations,” Mark Uyeda told attendees on March 17 at the Investment Company Institute’s investment management conference in San Diego.
Although he did not offer a specific timeline for ruling on the applications, Uyeda hinted that they would be fast-tracked for review and considered for exemptive relief while he serves as acting chair of the SEC.
Granting such case-by-case permissions creates “a laboratory where we can review new ideas from market participants”, Uyeda said.
This article was previously published by Ignites, a title owned by the FT Group.
“This gives the opportunity to consider the benefits of new products, as well as potential risks to investors and the market.”
“More than two years have passed since the most recent set of exemptive applications for ETF share class relief was filed,” he noted, adding that ETFs now accounted for roughly 30 per cent of total net assets that investment companies run.
Uyeda was named as acting SEC chair in February by US President Donald Trump. Uyeda is widely expected to be succeeded by Trump’s current pick for the post, Paul Atkins, who was nominated in January. Confirmation hearings for Atkins have not yet been scheduled by Congress.
Currently, there are 51 pending applications seeking some form of share class relief to broaden options for investors, according to a report from law firm Stradley Ronon published on March 17.
Over the past few years, the requests have piled up as fund managers have jumped on the opportunity to offer clients strategies in different vehicles. In some cases, managers have asked to launch ETF versions of existing active mutual funds; in other cases, they have asked to add long-only versions of existing ETFs.
Vanguard had held a patent on the process for its index-based funds until it expired in 2023.
BNY and DoubleLine became the most recent firms to join the queue, filing applications on Thursday.
“Very on-point for this administration — bodes well for innovation,” said Alex Alberstadt, counsel for Seward & Kissel’s investment management group.
ICI president Eric Pan, who briefly interviewed Uyeda on the conference stage after the speech, described the share class petitions as “one of several excellent ideas that are ripe for swift action”.
Pan congratulated Uyeda’s appointment to acting SEC chair in January in a statement that also nudged the agency to act on dual share class applications.
Uyeda’s comments were part of a longer speech at the ICI conference meant to outline his agenda.
Uyeda derided the agency’s approach to rulemaking under former chair Gary Gensler, saying that the agency hadn’t provided a “meaningful” opportunity to comment on SEC proposals, specifically on changes to open end fund liquidity requirements and swing pricing guidelines.
“One of my objectives will be to set forth a blueprint for restoring the commission’s rulemaking processes to the ‘gold standard’ among regulatory agencies,” Uyeda said.
“The commission’s blueprint needs to prioritise effective and cost-efficient regulations that respect the limits of our statutory authority,” he said.
He also characterised Gensler’s SEC as being generally opposed to innovation in the securities industry and called the agency “inflexible”.
*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com.
