A Republican win in the November U.S. elections likely would be a win as well for applicants seeking exemptive relief to offer ETF share classes of mutual funds, according to an attorney interviewed in an Aug. 13 episode of ETF TV.
“The upcoming election will essentially determine which party controls the Securities and Exchange Commission,” said Jeremy I. Senderowicz, a shareholder at law firm Vedder Price. “And that can have a real impact on ETFs.”
In a follow-up interview, Senderowicz clarified that by election he was referring to both the U.S. presidential election as well as congressional elections because control of the U.S. Senate may impact who can be confirmed to serve as an SEC commissioner in the next administration.
With regard to ETF regulatory issues, “the most important upcoming development has been the pending applications to offer ETF share classes of mutual funds,” Senderowicz, a member of Vedder Price’s investment services practice group, said during the episode, hosted by Margareta Hricova, managing director at ETFGI, and Deborah Fuhr, managing partner and founder of ETFGI, which owns ETF TV.
“This is the structure that was patented and pioneered by Vanguard over 20 years ago,” Senderowicz said in the episode. “With their patent expiring last year, many registrants have applied for exemptive relief to offer ETFs as a share class of mutual funds.”
Vanguard Group’s patent expired in May 2023.
So far, the SEC hasn’t approved any of those applications and has also signaled that it is “not looking to approve the share class applications any time soon,” the attorney said in the episode.
“If the Republicans win the election, there is a good chance these applications will be approved in one form or another, and if the Democrats win the election ... there is a good chance they won’t be,” Senderowicz said during the episode.
An SEC controlled by Republican appointees likely would be “much friendlier to innovation — including approving these applications,” he said in the follow-up interview, adding that calling such applications “innovation” is likely an overstatement considering the roughly two-decade precedent established by Vanguard.
The SEC has five commissioners who are appointed by the U.S. president with the advice and consent of the Senate, according to the SEC’s website. Terms, which last five years, are staggered. Commissioners may continue to serve for up to about 18 months after terms expire if not replaced prior to that. The president also names one of the commissioners as chairman, the website said.
