Overview
Title
ActiveShares ETF Trust, et al.
Agencies
ELI5 AI
The SEC is thinking about letting a special kind of fund, called ActiveShares ETFs, do things differently from normal rules, like trading in big amounts all at once to make buying and selling easier. If anyone wants to say "wait, let's talk about this," they have until February 8, 2021, to tell the SEC by email.
Summary AI
The Securities and Exchange Commission (SEC) has published a notice regarding an application for an order under the Investment Company Act of 1940. The order would grant exemptions from certain sections of the Act and a rule under it, allowing ActiveShares ETFs to issue and redeem shares in large batches, and facilitate market transactions at negotiated prices. The application involves the ActiveShares ETF Trust, Legg Mason Partners Fund Advisor, LLC, and Legg Mason Investor Services, LLC, seeking relief consistent with a prior order. The SEC will issue the order unless someone requests a hearing by February 8, 2021, by contacting the SEC via email.
Keywords AI
Sources
AnalysisAI
The document from the Federal Register presents a notice by the Securities and Exchange Commission (SEC) concerning an application for an order under the Investment Company Act of 1940. This order seeks to allow the ActiveShares ETF Trust to engage in certain financial activities that would otherwise be restricted by the Act. Notably, the order would permit these funds to issue and redeem shares in large blocks known as "creation units" and allow transactions to occur at negotiated prices instead of adhering strictly to the net asset value.
General Summary
The notice outlines a request from the ActiveShares ETF Trust and its affiliated companies for exemptions from several regulatory provisions. These exemptions would facilitate unique trading mechanisms for ActiveShares ETFs compared to traditional mutual funds, potentially offering more flexibility and efficiency in trading. Specifically, the order would replicate the terms of a prior approval (referred to as the "Reference Order") granted under similar circumstances, suggesting these types of arrangements are becoming increasingly common as the securities landscape evolves.
Significant Issues and Concerns
Several technical and legal terms are prevalent throughout the document, such as "exemptive relief," "creation units," and "verified intraday indicative value," making it challenging for a layperson to grasp the full implications. The use of specialized jargon might alienate those who are not familiar with securities law or the Investment Company Act.
Furthermore, the document does not fully explain the previous Reference Order, making it difficult for readers to understand the precedent being applied. Concerns might also arise regarding how this process appears to favor entities that have existing agreements with Precidian Investments LLC, potentially suggesting a lack of equal opportunity for other market participants.
Impact on the Public
The broader public may be unaffected directly by the particularities of this order. However, if the implementation of this order leads to greater market efficiency or lower costs for funds, consumers might indirectly benefit. Such efficiencies could lead to enhanced investment opportunities or more competitive prices for financial products.
Impact on Specific Stakeholders
For firms involved in managing and distributing ActiveShares ETFs, the order could lead to increased operational flexibility and cost efficiency. The advisory and distribution entities could experience a competitive advantage, potentially encouraging innovation in the financial products they offer.
On the other hand, stakeholders without ties to the firms granted this type of exemptive relief might perceive an uneven playing field. Smaller firms or newcomers to the market might find it challenging to compete, particularly if similar relationships or prior agreements are required to obtain such regulatory leniency.
Conclusion
While the SEC's notice aims to modernize and provide certain funds with increased operational flexibility, understanding the document proves challenging due to its technical nature. The order's relationship to previous determinations suggests continuity in regulatory practice but raises questions about equitable access to such benefits among various stakeholders in the financial markets. As the SEC navigates these regulatory advancements, the balance between innovation and equal opportunity remains crucial.
Issues
• The document uses technical financial and legal jargon that may be difficult for a layperson to understand, such as 'exemptive relief,' 'creation units,' and 'verified intraday indicative value.'
• The document includes several references to specific sections of the Investment Company Act of 1940 and other legal provisions without providing explanations or context, which could be unclear to those unfamiliar with the Act.
• The process for requesting a hearing is specified, but it may not be straightforward for individuals who are not well-versed in legal or regulatory procedures.
• The document references a 'Reference Order' multiple times without providing a detailed explanation of its contents or implications, which may limit understanding for those who are not privy to this prior documentation.
• There is a mention of intellectual property rights related to the Funds, but no specifics are provided, which could lead to uncertainty about the scope and impact of these rights.
• Potential favoritism may arise as the Order allows relief based on a previous order (Reference Order) and license agreement with Precidian Investments LLC, suggesting a relationship that may not be accessible to others.