Franklin Templeton is seeking exemptive relief from the Securities and Exchange Commission to offer both ETF share classes of mutual funds and mutual fund share classes of ETFs, a recent filing shows.
“Applicants are filing the application because they believe that the ability of a fund to offer both mutual fund shares and ETF shares could be beneficial to the fund and to shareholders of each type of class,” according to the June 13 filing.
Franklin joins a parade of more than a dozen firms seeking exemptive relief from the SEC that would permit a multiclass structure. Most of the firms, including Dimensional Fund Advisors and Fidelity Investments, are seeking exemptive relief that would enable them to offer ETF share classes of mutual funds.
F/m Investments, by contrast, in August 2023 filed an application seeking an order that would allow each of the ETFs in its US Benchmark Series to offer a mutual fund share class. Like Franklin, at least one other firm — TCW Group — is seeking exemptive relief that would allow mutual funds to also offer ETF share classes and ETFs to offer mutual fund share classes, a March 20 filing shows.
The June 13 filing listed Franklin Templeton ETF Trust, Franklin Templeton Fund Adviser, Franklin Advisers, Franklin Advisory Services, Franklin Templeton Investment Management Limited and Legg Mason Partners Investment Trust as applicants.
The filing said that in 2000 the SEC granted an exemptive order to the Vanguard Group allowing it “to offer certain index-based open-end management investment companies with mutual fund classes and exchange-traded classes.” Relying on that order and subsequent ones, “Vanguard has become a major sponsor of index-based ETFs,” the filing said.
According to its website, Vanguard in 2001 “began offering ETFs as exchange-traded shares of Vanguard index funds — a unique and patented approach that leveraged the size and scale of existing index funds to bring lower-cost entries to the ETF market.” Vanguard’s patent expired in May 2023.
“Applicants continue to see demand for ETFs to help investors meet their distinct financial goals and look for opportunities to grow their lineup with innovative strategies that offer choice, value, and new opportunities to help meet the evolving needs of investors,” the June 13 filing by the Franklin applicants said. “Applicants are committed to providing customers choice in the investment products they offer.”
A Franklin Templeton spokeswoman declined to comment beyond the filing. Franklin Templeton had more than $1.6 trillion in assets under management as of May 31.
