Our Digital Edition for June chronicles many of the rapid, drastic changes the SEC has gone through during the past few months.
But industry experts said we shouldn’t worry too much about crazy rumors emerging from that chaos.
There is almost no truth, for example, to the rumor that the agency’s new leadership has become so obsessed with private- and digital assets that commissioners voted to make CryptoBro the official language of the SEC.
The suggestion that Brian Daly, the new director of the SEC’s Division of Investment Management, will show up for his first day on the job with knuckle tattoos reading CAVEAT on one hand and EMPTOR on the other is also highly doubtful, barring erroneous spelling or additional fingers.
And new SEC chair Paul Atkins almost certainly does not wear a “Deregulators Decry Due Process” T-shirt to work on casual Fridays.
It’s true that changes at the SEC have prompted a lot of talk among the cognoscenti. However, much of the positive gossip focuses less on politics than on the decision to offer more widespread share-class relief and how quickly it might give that permission to fund companies that are really, really eager to offer ETF shares to mutual-fund investors and vice-versa.
The questions fund directors face, however – as new FD writer Sasha Chen details in our cover story on the topic – revolve around the details of how to deliver multi-class share investments while also ensuring the result would be a clear benefit to investors.
Investors who can buy ETF shares through their existing mutual-fund investments get a lot of tax advantages and a lot more control over the performance of their investments.
But fund boards will have to look deeply into the details of fund structures, strategies and a whole series of dependencies to make sure neither ETF nor mutual-fund investors get stuck with a disproportionate level of risk or cost. Fund boards will have to also have to get themselves up to speed on differences in distribution models, marketing goals, investment strategies, liquidity requirements and liquidity management techniques, according to Chen’s sources.
Few fund boards will be willing to approve mixed-share investing right away, however, without a long, careful look at the details of what the SEC will allow and what the result would be for investors in each fund they oversee, warned Endeavor Investment Partners founder Patrick Carolan
“It’s going to be incumbent on the board to also make sure they have done their own research to determine whether it makes sense for the shareholders,” Carolan said.
