Publications

SEC Staff Says ETF Transactions Should be Subject to Code of Ethics Reporting

Spring 2006
Pamela S. Poland
Mutual Funds Regulatory Updates - Spring 2006

In a recent no-action letter, National Compliance Services (pub. avail. Nov. 30, 2005), the staff of the Securities and Exchange Commission (the “Staff”) took the position that fund codes of ethics (adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended) should cover transactions in all exchange-traded funds (“ETFs”), whether the ETF is organized as an open-end investment company (“Open-End ETFs”) or a unit investment trust (“UIT ETFs”). Prior to the letter, many codes of ethics had exempted Open-End ETFs from their reporting requirements because Rule 17j-1 excludes shares of open-end funds from the definition of “covered security” and, thus, excepts transactions in Open-End ETFs from the Rule’s reporting requirements.