U.S. Securities and Exchange Commission seeks comment on novel ETFs and potential changes to ETF and registration rules

The U.S. Securities and Exchange Commission has issued a request for comment on exchange-traded funds seeking exposure to innovative asset classes or using novel investment strategies, as it assesses whether the current framework remains appropriate for these products. The review centers on three issues: whether some novel ETFs qualify as investment companies, whether they can operate consistently with the ETF rule under the Investment Company Act, and whether the Securities Act registration process gives staff enough time to review products that raise new legal or structural questions. The request points to recent ETF growth and the emergence of products tied to areas such as crypto assets, commodity-focused instruments, single-stock strategies, heightened leverage, blockchain-enabled opportunities, private assets and event contracts. On substance, the Commission is asking whether rule 6c-11 should be amended for novel ETFs through new portfolio requirements, restrictions on certain asset classes or strategies, or investor-facing measures to improve understanding of how these products differ from other ETFs. It is also seeking views on whether the automatic effectiveness periods for post-effective amendments under rule 485 should be extended for novel ETFs, whether the Commission should have greater ability to delay or suspend effectiveness, and whether changes are needed for pre-filing engagement, unresolved staff comments, material strategy changes before launch, and ETF disclosure requirements. Comments are due within 60 days after publication of the request in the Federal Register.