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ICI Protests ETF Ownership Rule

The Investment Company Institute does not want affiliates of the mutual fund advisor counted with affiliates of the fund itself when determining the ownership of an exchange-traded fund.

The Securities and Exchange Commission has proposed a rule that caps fund ownership of an ETF at 25% to prevent one fund from having a large enough stake to control the ETF. Affiliates of both the fund and the advisor would be counted under the proposal.

ICI said in a May 19 comment letter said members would have trouble complying because advisors are often unaware of where affiliates may be investing. The advisors are often affiliated with large global firms—including foreign investment advisors or banks, insurance companies and defined benefit plan trustees—whose other units may be investing in a particular ETF. It is unlikely the affiliates would have “either the ability or the incentive to join an advisor to collectively control an ETF,” the letter added.

ICI said an exception could be made in cases where affiliates consult with advisors on securities transactions.


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