White Asks 53 Questions When It Comes to ETFs
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Monday, June 15, 2015

White Asks 53 Questions When It Comes to ETFs

Many fundsters have long complained of the arduous, complex, and opaque process for getting new ETFs approved by the SEC. Aggrieved ETF-favoring fundsters, now is your chance to give the commissioners a piece of your mind.

Kara M. Stein
U.S. Securities and Exchange Commission
On Friday the regulatory agency's Secretary, Brent Fields, issued a request for public comment on the Securities and Exchange Commission's "review of the listing and trading of new, novel, or complex exchange-traded products (ETPs)." Once the 51-page request hits the Federal Register, fundsters and anyone else who wants to chime in will have 60 days to do so.

Sarah Lynch of Reuters reported on the SEC's request for comment. The wire service raised the question as to whether the request is part of the agency "weighing whether to craft new rules which could make it easier and less expensive for sponsors to launch certain kinds of ETFs that are less complex by letting them sidestep the onerous exemptive application process."

Yet perhaps the commissioners are leaning the other way, towards slowing down and beefing up the approval process that new ETFs go through. Chris Dieterich of Barron's reminds readers that back in February SEC commissioner Kara Stein dissented from her colleagues' decision to green-light a new ETF structure from AccuShares. At the time Stein called for "a more thoughtful, transparent, and fulsome review process for these types of ETFs, even if it means disapproving proposed rule changes until we get comfortable with particularly risky and complex products." She claimed that the SEC had "rubberstamped opaque, risky products masquerading as financial innovation."

A more rigorous review process is especially needed here ... [B]efore proceeding with approvals for novel products, I reiterate that we would benefit immensely from public input on these issues, especially regarding broader market and systemic impacts of novel exchange-traded products. The Commission should be taking more affirmative steps to obtain public comment and academic analysis in this space.

Stein was outnumbered on that vote, and the AccuShares structure got its SEC stamp. Yet the voting may soon change, as two of the other four commissioners are reportedly on the way out.

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