The SEC’s recent move toward granting exemptive relief for Exchange-Traded Fund (ETF) share classes of mutual funds has sparked meaningful discussion across the asset management industry. Although the concept itself is not new, formal regulatory recognition would mark a significant shift in how mutual funds are structured, distributed, and serviced.
This change could redefine product strategy and investor access, making it essential for fund sponsors, boards, and service providers to begin evaluating their readiness.
Additionally, this potential development raises important questions, not just about regulatory mechanics, but about operational feasibility, investor experience, and long-term market impact. For fund sponsors, boards, and service providers, the implications are complex and multifaceted.
ACA Foreside’s Perspective
From ACA Foreside’s vantage point, as a limited-purpose broker-dealer and principal underwriter to hundreds of fund sponsors, we see this moment as an opportunity for thoughtful evaluation. Although ACA Foreside is not a fund sponsor and does not have an exemptive application before the Commission, our role in the distribution ecosystem gives us a front-row seat to how such changes could unfold.
ETF innovation has historically outpaced regulation, requiring the industry to adapt quickly. We’ve seen this with the emergence of semi-transparent ETFs, digital asset products, and mutual fund-to-ETF conversions.
Each wave of innovation has brought its own set of challenges and learnings. ETF share classes, once permitted, would likely follow a similar trajectory, by introducing new operational models, requiring updates to shareholder servicing frameworks, and prompting fresh governance considerations.
Preparing for What’s Next
ACA Foreside has convened a working group to examine the practical realities fund sponsors may face. Our goal is to ensure we’re fully prepared to support asset managers seeking to establish an ETF share class. Key questions under review include:
- How will Net Asset Value (NAVs) be calculated across share classes?
- Which distribution models will be sustainable?
- How will boards evaluate fiduciary responsibilities in this new context?
These are not questions with immediate answers, but they are worth asking now. The industry benefits when stakeholders engage early, share perspectives, and prepare thoughtfully. ETF share classes will become a reality, and the conversations we’re having are invaluable.
This encourages us to revisit assumptions, refine processes, and consider how innovation can serve investors more effectively.
Join the Conversation
If you’re exploring the possibility of ETF share classes or simply want to stay informed on how ACA Foreside is preparing to support advisers who seek to obtain exemptive relief to launch an ETF share class for a mutual fund, we welcome the opportunity to connect.