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Friday, April 29, 2016

More ETF Policing? E Tu, Gastineau?

News summary by MFWire's editors

Gary Gastineau, one of the pioneers of the ETF industry and a key player in a new ETF-like alternative, is calling for more regulatory oversight of ETFs.

Gary Gastineau
ETF Consultants LLC
Trevor Hunnicutt of Reuters offers a sneak preview of Gastineau's concerns, which will be detailed in a Journal of Portfolio Management article coming out this weekend. "Many ETFs just don't work very well," Gastineau tells the wire service.

Gastineau "now says he wants the [SEC] to police data published by fund companies to ensure it is not misleading and he is also asking the SEC to deny applications for some new ETFs," Reuters writes.

Gastineau, 76, is an industry consultant and "helped invent" Eaton Vance's [profile] new active-ETF-like NextShares product structure (which combines' ETFs real-time trading with mutual funds' less frequent disclosures). He worked at the AMEX in the early 1990s, promoting ETFs when they were first starting out. Later he worked on Nuveen's first ETF push, joined ETF Advisors and fought iShares (then part of Barclays Global Investors) over bond ETFs, took his own stab at active ETFs, and then sold that business, Managed ETFs, to Eaton Vance.

He also still seems to have the SEC's ear. Reuters points out that the regulatory agency "cited Gastineau's research or corresponded six times when, in 2014, it tabled a proposal to launch a new kind of ETF that would compete directly with NextShares." The wire service may be referring to Precidian Investments attempts to gain SEC approval for a non-transparent, actively managed product that, unlike NextShares, would still be in ETF form.

Mercer Bullard, professor at the University of Mississippi School of Law and founder of Fund Democracy, wonders if Gastineau's ties with NextShares might "make the SEC look at anything he says with a skeptical eye."

Gastineau's new remarks might find a receptive audience in SEC commissioner Kara Stein, who has been outspoken among her colleagues in questioning what she sees as "particularly risky and complex products" in the ETF world. 

Edited by: Neil Anderson, Managing Editor

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