Ropes & Gray’s ETF Specialists Widely Cited on the SEC’s Proposed Changes for Fund of Funds Arrangements

On Dec. 19, the SEC unanimously voted to propose a new rule that would make it easier for funds to invest in other funds beyond the current limits of the ’40 Act. Current approaches to funds of funds are outlined by a “patchwork” of past SEC guidance, rules and exemptive orders, investment management partner Jeremy Smith explained in a Dec. 21 Fund Directions article titled “Proposed rule on fund of funds arrangements would reinforce board oversight duties.”

In a Dec. 21 article published by Barron’s titled “New ETF Rules Will Expand What Funds Can Own,” investment management counsel Ed Baer outlined that “The idea is to put everyone on a level playing field,” adding that  “It’s possible there will be new fund-of-fund products because of this rule.”

Remarks from Mr. Baer were also included in an Ignites article titled “SEC Paves Simpler Path for Fund-of-Funds Products” and two articles by Compliance Reporter titled “SEC proposes new fund of funds rule, eliminating exemptive orders” and “With SEC proposal, affiliated funds of funds face a choice.”

And, in a subsequent Ignites piece titled “SEC Draft Fund-of-Funds Rule Favors ETFs, Throws Wrench in Liquidity Programs,” Mr. Baer also discusses how the rule proposals may complicate firms’ efforts to execute newly developed liquidity risk management programs. The article also cites from Ropes & Gray’s Jan. 3 client alert on this.