The SEC staff is lifting its moratorium on approving exemptive requests for actively-managed ETFs on two conditions: (1) the ETF board periodically reviews and approves the ETF’s use of derivatives and how the ETF’s adviser assesses and manages risk with respect to derivatives and (2) the ETF discloses its use of derivatives in its offering documents and financial reports in a manner consistent with SEC and staff guidance.
The moratorium on exemptive orders began in March of 2010 and applied to all exemptive requests for actively-managed and leveraged ETFs that would make significant investments in derivatives. This change in policy does not impact the moratorium on exemptive requests for leveraged ETFs.
The policy shift was announced by Norm Champ, the Director of the SEC Division of Investment Management, during a speech at an ALI CLE conference on December 6. During the speech, he stated that the division is continuing to consider potential further guidance for mutual funds on the use of derivatives.