The best way to analyze the impact of Rule 12d1-4 on ETFs is to compare the different conditions of the rule with those of older SEC funds. The table below provides a comparison of the conditions imposed on ETFs, as they received funds acquired under previous exempt contracts and did not exist before 1993 under Rule 12d1-4.15. On the contrary, retail investors have invested largely in investment funds and, to a lesser extent, in closed funds. This is mainly due to the fact that the 1940 Act does not permit the operation of ETFs that require an exemption from the U.S. Securities and Exchange Commission (SEC) to work legally. Since ETFs required an SEC exemption order until 2020, much of their activity in the past may be related to the authorizations granted to them under their SEC exemption contracts. This also applies to the role that ETFs tend to play in fund agreements. 13 The debate on FOF ETF Relief, which is included in the debate, concerns exclusively the acquisition of funds and acquired funds (i.e. ETFs) registered under the 1940 Act and which are not part of the same group of investment companies within the meaning of Section 12 (d) (1) (G) (i) (II). See note 9 (definition of the same group of investment companies). See also the acceptance version at 17-18.

The text of the acceptance communication makes it clear that the SEC has tried to codify this facility in Rule 12d1-4.24 It is also extracted from the text and structure of Rule 12 dd1-4 a). However, Rule 12 quinz1-4 point a) continues to do the trick: to the extent that Rule 12d1-4 (a) (a) (1) and (2) provides for a total exemption from Section 17(a) 25, although Rule 12d1-4 (a) (3) did not exist, Rule 12d1-4 (a) (a) (1) and (2) allow all types of businesses related to all types of registered funds to act with such funds in kind. In this regard, there is a gap between the acceptance authorization and the rule; and from the experience of most practitioners, it is the rule itself that will have control. Under Rule 12d1-4, the acquiring fund and the acquired fund must enter into an agreement (Fund of Funds Investment Agreement) before the acquiring fund exceeds the limits of 3/5/10, unless the investment advisor or sub-advisor of an acquiring fund acts as an investment advisor to the acquired fund. The fund`s investment agreement is a reef to the SEC`s agreement between the acquisition and the acquired fund, the Participation Agreement. 18 Our general FOF warning describes the differences the SEC presents between the participation agreements and the fund`s investment agreement.19 16 See Note 13 above. In particular, the same groups of funds that rely entirely on 12 (d) (1) (G) will not be subject to this requirement for recognition, as it is not included in the statute itself. Despite the large number of ETF orders issued over the past 27 years, the conditions imposed on ETFs used as acquired funds were consistent.13 Conditions for all types of ETFs, including transparent and semi-transparent ETFs, were: 14 This Dechert Newsflash provides a brief overview of the fund arrangements and components of the SEC`s final rule package.