On March 17, 2026, the SEC granted exemptive relief from Section 11(d)(1) of the Securities Exchange Act of 1934, as amended, and Rules 10b-10 and 14e-5 thereunder, and the SEC staff issued no-action relief regarding Rules 15c1-5 and 15c1-6 under the Exchange Act. The exemptive relief and no-action relief together pave the way for the operation of dual-class ETFs (i.e., a registered investment company that offers a class of shares operating as an ETF and a class of shares operating as an open-end mutual fund), which the SEC began permitting in late 2025 pursuant to separate exemptive relief (dual-class ETF relief), by providing the same type of regulatory relief with respect to broker-dealers’ trading of ETF shares that was granted for single-class ETFs in 2019 in conjunction with the SEC’s adoption of Rule 6c-11 under the Investment Company Act of 1940, as amended (known as the ETF Rule).
Background
The 2019 exemptive relief for single-class ETFs is only available with respect to ETFs that rely on the ETF Rule, which, among other things, requires that the ETF’s shares be listed on a national securities exchange and trade at market prices and that the ETF transact creation units with authorized participants. Because, unlike single-class ETFs, dual-class ETFs offer mutual fund shares that are not exchange-listed, do not trade at market prices and permit mutual fund class shareholders to exchange their shares for ETF shares through an exchange privilege, dual-class ETFs generally are not able to rely on the ETF Rule and the 2019 exemptive relief.
2026 Exemptive Relief
The 2026 exemptive relief generally extends the 2019 exemptive relief to broker-dealers’ trading of dual-class ETF shares provided that (i) the dual-class ETF received dual-class ETF relief and that requires the ETF share class to operate in compliance with the ETF Rule (except that the mutual fund class shares will not be listed on a national securities exchange and the dual-class ETF may offer an exchange privilege), (ii) other than as provided for in the relief from Rule 14e-5, the ETF class must satisfy the diversification requirement set forth in the 2026 relief, (iii) the broker-dealer relying on the 2026 relief must meet certain conditions specific to each applicable Exchange Act provision, as set forth in the relief, and (iv) the 2026 relief does not apply to purchases or sales of ETF class shares of a dual-class ETF in the secondary market, except for limited exceptions.
2026 No-Action Relief
In conjunction with the 2026 exemptive relief, the SEC staff issued no-action relief with respect to the requirements of Rules 15c1-5 and 15c1-6 under the Exchange Act applicable to broker-dealers. The no-action relief permits broker-dealers to effect in-kind creation and redemption transactions involving ETF shares of a dual-class ETF for customers without providing disclosure about the broker-dealer’s control relationship with an issuer or its participation or interest in a primary or secondary distribution of a component security, provided that (i) the dual-class ETF received dual-class ETF relief and that requires the ETF share class to operate in compliance with the ETF Rule (except that the mutual fund class shares will not be listed on a national securities exchange and the dual-class ETF may offer an exchange privilege), and (ii) the creation/redemption transactions will be effected subject to the terms and conditions set forth in the 2019 exemptive relief with respect to Rules 15c1-5 and 15c1-6 under the Exchange Act, including a condition requiring broker-dealers to provide any information to which a customer is entitled under Rules 15c1-5 or 15c1-6 upon request and to fulfill such requests in a timely manner.
The SEC’s order is available here.
The SEC staff’s no-action letter is available here.
