The Securities and Exchange Commission is now prioritizing its review of applications for firms aiming to offer dual-share-class products, according to SEC acting Chair Mark Uyeda.
There are currently 51 pending applications at the SEC from firms seeking exemptive relief to offer exchange-traded funds as a share class within a multiple-share-class structure, law firm Stradley Ronon Stevens & Young said in a report.
Of note, major players like BlackRock and State Street Global Advisors are seeking relief to offer a multiclass structure, SEC filings show. BlackRock is seeking exemptive relief to offer ETF share classes of mutual funds, an Oct. 30 filing showed. SSGA is seeking relief that would allow ETFs to offer mutual fund share classes, a Nov. 1 filing accepted Oct. 31 showed.
The last four years at the SEC under former Chair Gary Gensler have been marked by an inflexible approach to innovation, Uyeda said in a March 17 speech at the Investment Company Institute’s Investment Management Conference in San Diego.
He is aiming to change that.
“One innovation may be funds offering both mutual fund and ETF share classes,” Uyeda said. “More than two years have passed since the most recent set of exemptive applications for ETF share class relief was filed. 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.”
His remarks didn’t include a timeline for the expedited review process, but he noted that ETFs now account for about 30% of total net assets that investment companies manage.
A December survey from Cerulli Associates showed that 59% of U.S. ETF issuers polled said they are either currently developing or planning to develop dual-share-class structure products.
“Dual-share-class mutual fund and ETF product is a holy grail of product development as it will allow investors to select the structure that works best for them for a particular exposure,” Cerulli said in the survey’s summary.
Currently, the share class structure is available for only indexed products offered by Vanguard Group, which launched ETFs in 2000 and received a patent on the process in 2001. The Vanguard patent expired in May 2023.
