Both ETFMG and Mr. Masucci received Wells notices from SEC staff, according to a July 14 supplement filed with the SEC by ETF Managers Trust, an umbrella trust associated with ETFMG's '40 Act equity and fixed income funds. The filing said that effective July 15, Mr. Masucci will have resigned from his positions as trustee of ETF Managers Trust, chairman of the board of trustees, and as president and secretary of the trust.
In addition, Mr. Masucci resigned as ETFMG's CEO and as a portfolio manager for a number of the manager's ETFs, the filing indicated.
An ETFMG spokesman declined to comment Wednesday regarding the SEC probe cited in the filing. In an email Wednesday, an SEC spokesman said the SEC "does not comment on the existence or nonexistence of a possible investigation."
The ETFMG Alternative Harvest ETF, which had assets under management totaling $221 million as of Thursday, tracks the Prime Alternative Harvest index, which is designed to measure the performance of companies within the cannabis ecosystem benefiting from global medicinal and recreational cannabis legalization initiatives, ETFMG's website said.
The Wells notices signaled the SEC staff's preliminary determination to recommend that the SEC begin a civil action against ETFMG and Mr. Masucci "stemming from findings made during its non-public investigation," the filing said.
"The Recipients cooperated with the investigation and during the Wells process each Recipient demonstrated to the SEC staff why it believes its conduct was appropriate, in keeping with industry standards, and that no action should be taken," the filing said.
Both Mr. Masucci and ETFMG have been engaged in settlement talks with SEC staff to conclude the investigations, the filing said.
"The Recipients, on a neither admit nor deny basis have, consented to the entry of findings under Sections 206(1) and 206(2) of the Investment Adviser's Act, Section 17D of the Investment Company Act of 1940, and Rule 17d-1 thereunder," the filing said.
The settlement will involve a "financial component" for both Mr. Masucci and ETFMG "along with certain undertakings, including Mr. Masucci's resignation as Trustee and CEO," the filing said.
"The expected findings principally pertain to alleged non-disclosure of conflicts of interest arising in connection with the ETFMG Alternative Harvest ETF (MJ) participation in the securities lending program administered by its prior custodian," the filing said. "The Recipients expect to submit Offers of Settlement incorporating these charges and applicable penalties for consideration by the Commission."
In addition to the information regarding the Wells notices, the filing also indicated that ETF Managers Trust's board of trustees had approved an agreement providing for the reorganization of 12 "Target Funds" into 12 corresponding new Amplify ETFs, referred to as the "Acquiring Funds."
The reorganizations will shift management responsibility from ETFMG to Amplify Investments, the acquiring funds' investment adviser. The reorganizations are subject to certain conditions, including approval by the target funds' shareholders, the filing said.
In June, Amplify Investments and ETFMG announced a definitive agreement under which Amplify would acquire ETFMG's ETF lineup, according to a June 12 news release.
Amplify ETFs had more than $4.4 billion in assets under management as of June 30, according to its website. ETFMG's ETF lineup currently has assets under management totaling $3.7 billion, the ETFMG spokesman said.