News | 04.15.19
SEC Cracks Down on ETF Names That Could Be Misleading Investors
A growing number of thematic exchange-traded funds (ETFs) are changing their identities before they even start trading, putting the SEC on alert. More than a third of such funds launched last year tweaked their names during the SEC's approval process, filings show. Overall, more than 10 percent of new ETFs last year targeted a theme, and assets in these funds nearly tripled between 2014 and 2018. Issuers are prohibited from using “materially deceptive or misleading” names under the Investment Company Act of 1940. Furthermore, the Names Rule, adopted in 2001, requires that funds ensure at least 80 percent of assets are in the type of investments suggested by their monikers. While asset managers could opt to rename a fund for marketing reasons, publicly available letters show last year the SEC questioned several issuers that changed their names.
Read the full article on Bloomberg