Securities Regulation Daily Wrap Up, INVESTMENT COMPANIES—Investment companies seek SEC’s approval to offer exchange-traded shares, (Sep 30, 2025)

By John Filar Atwood

The exemptive order was necessitated by the 2019 adoption of Investment Company Act Rule 6c-11 which did not provide exemptive relief for ETF classes of shares.

Dimensional Investment Group and affiliates have applied for an SEC order that would permit a registered open-end management investment company to offer one class of exchange-traded shares that operates as an exchange-traded fund and one or more classes of shares that are not exchange-traded. The order would provide multi-class exchange-traded funds (ETFs) with the relief necessary to permit standard ETF operations consistent with Investment Company Act Rule 6c-11, and relief for a fund to offer an ETF class and one or more mutual fund classes (Investment Company Act Release No. 35770, (Sept. 29, 2025)).

Background. The SEC granted a series of exemptive orders between 2000 and 2007 that permitted certain mutual funds to offer a class of exchange-traded shares. In 2019, the Commission adopted Rule 6c-11 to provide the exemptive relief needed to permit ETF operations.

The Rule 6c-11 relief did not allow for ETF classes because ETF class relief raises policy considerations that are different from those the SEC intended to address under Rule 6c-11. The adopting release noted that an ETF class that transacts with authorized participants on an in-kind basis and a mutual fund class that transacts with shareholders on a cash basis may give rise to differing costs to the portfolio. Accordingly, the Commission concluded that share class ETFs should request relief through the exemptive applications process so that the agency could assess all relevant policy considerations in the context of the particular facts and circumstances.

Operational relief. If granted, the order would permit ETF shares of the multi-class ETF funds to be listed on a national securities exchange and traded at market-determined prices, and permit ETF shares to be issued to and redeemed by authorized participants in “creation units” only, except with respect to the specified exchange privilege and as permitted by Rule 6c-11(a)(2).

The order also would allow certain affiliated persons of a multi-class ETF fund to purchase creation units with “baskets,” as defined in Rule 6c-11, and allow certain multi-class ETF funds that include foreign investments in their baskets to pay redemption proceeds more than seven calendar days after ETF shares are tendered for redemption. The order would provide the multi-class ETF funds with the same relief as contained in Rule 6c-11, except as specifically described in the application.

Class relief. The order also would permit a multi-class ETF fund to offer one ETF class and one or more mutual fund classes. The multi-class ETF fund structure would comply with Investment Company Act Rule 18f-3, except for certain ways in which an ETF class and mutual fund classes would have different rights and obligations. The multi-class ETF funds may offer an exchange privilege that would permit shareholders in a mutual fund class to exchange mutual fund shares for ETF shares.

Companies: DFA Investment Dimensions Group Inc.; Dimensional Investment Group Inc.; Dimensional ETF Trust and Dimensional Fund Advisors LP.

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