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SEC No-Action Letter Temporarily Expands Ability of Affiliates to Purchase Debt Securities from Mutual Funds

In a March 26, 2020 no-action letter (the “Letter”) addressed to the Investment Company Institute, the SEC staff stated it would not recommend enforcement action against a registered open-end investment company that is not an ETF or a money market fund (each, a “Fund”) or an affiliated person (or an affiliated person of an affiliated person) of the Fund (each, an “Affiliate Purchaser”) that is not a registered investment company, if the Affiliate Purchaser purchases a debt security from a Fund. Rule 17a-9 under the 1940 Act already permits an Affiliate Purchaser of a money market fund to purchase certain securities from the money market fund – the Letter temporarily expands the relief provided by the rule by permitting purchases from non-money market funds.

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Converting Traditional Open-End Funds into ETFs

Practices: Asset Management, Investment Management

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The Securities and Exchange Commission (the “SEC”) recently published a notice relating to an application for exemptive relief filed by Precidian ETFs Trust (“Precidian”) that would permit an actively managed exchange-traded fund (“ETF”) to operate without being subject to the current daily portfolio transparency condition included in past active ETF orders. We anticipate that this structure may be attractive to many active managers who may seek to offer their strategies as ETFs, including potentially through the conversion of an existing open-end fund into an ETF.

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