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Abstract: 

In this article, we describe the requirements for complying with the SEC’s exemptive orders permitting ETF share classes and certain share class exchanges. We then explore some of the issues presented by the dual class structure that may challenge fund advisers and sponsors, such as product management issues (e.g., potential transparency into mutual fund holdings, inhibiting capacity control), operational concerns (e.g., effecting exchanges of mutual fund class shares for ETF shares), and regulatory compliance issues (e.g., identifying appropriate peer groups in connection with Section 15(c) reviews and approvals). We also consider future developments and approaches that may be taken by industry members to launch, manage, and distribute ETFs as a share class.

Keywords: Rule 22c-; Dual Share Class Structure; Cross-Subsidization; Regulation Best Interest

Affiliations:  1: K&L Gates LLP; 2: K&L Gates LLP.