ETF/Mutual Fund Dual Share Class Anticipated Approval | Salvatore Faia Insights
Vigilant Insights
Introduction
It is anticipated that the SEC may approve the majority of exemptive relief applications for the dual share class structure. This will come as welcome news as the industry sees significant changes in both the leadership structure and stated goals under a new presidential administration.
Vigilant Compliance’s CEO, Salvatore Faia, JD, CPA, CFE recently provided his insights to Ignites about the likely approval of dual share class structures within the next few months.
Salvatore Faia Insights
A significant number of Fund Companies are seeking exemptive relief for a dual share class structure. The SEC has indicated that their major concerns with the applications have been addressed by recent changes from the Fund Companies.
Salvatore believes that products considered novel will not be included in the first approvals, due to the difficulty in the valuation of some of those products. He predicts approvals will be received within the next three months.
The key regulatory concerns for the SEC include:
- Cross-subsidization
- Different classes declaring and paying/reinvesting dividends on different days
- Inequitable voting power
- Investor Confusion
The SEC appears to focus on the following regarding board reporting:
- Initial Evaluation and Approval of the Share Class
- Ongoing Monitoring Process
- Ongoing Evaluation and Oversight
Vigilant’s Conclusion
There are many compliance nuances that will be vital for SEC approval and on-going compliance with these products.
It would be prudent for Firms to utilize experienced Compliance Professionals that can leverage deep industry insights and over 500 hundred years of collective compliance experience to guide Firms in achieving their business goals while maximizing their compliance efficiency.
Vigilant has a twenty (20) year track record of providing Outsourced Compliance Services and is an award-winning and industry-renowned Compliance Firm. Reach out to Vigilant today to discuss any questions you may have.