Recent years have seen significant development and growth of exchange-traded funds (ETFs) and related products, such as exchange-traded notes (ETNs) and physical and financial commodities-based exchange-traded vehicles (ETVs). Sutherland attorneys serve as counsel to some of the leading industry innovators of exchange-traded products. We guide exchange-traded product sponsors through complex and uncharted legal waters resulting in creative solutions that help clients bring novel products to market in an efficient and timely manner.
Cutting-Edge Practice
Our cutting-edge practice has permitted us to:
- Advise clients in all aspects of developing, launching and operating ETFs and ETVs.
- Assist a commodity pool operator in all regulatory aspects of developing and operating one of the first exchange-traded commodity pools investing in oil futures contracts and other oil interests.
- Counsel a client in developing innovative ETFs to invest in credit default swaps.
- Represent a client in developing leveraged and inverse leveraged commodity ETVs.
- Advise a client regarding the development, operation and liquidation of ETFs investing in U.S. Treasury securities.
Exchange-Traded Funds
ETFs are regulated as mutual funds under the Investment Company Act of 1940 (1940 Act), but because of their unique structure and distribution, they also are subject to additional requirements under federal securities laws. Sutherland counsels clients in all aspects of launching and operating ETFs, including the preparation of corporate and Securities and Exchange Commission (SEC) filings, organization and documentation of board activity, compliance manuals, and all necessary contracts and agreements.
Other Exchange-Traded Products
A variation of the ETF is the exchange-traded vehicle. ETVs are similar to ETFs, except that they invest in commodities futures contracts (e.g., oil and natural gas futures contracts) or other types of financial instruments that are not securities and are not regulated under the 1940 Act. This latter regulatory aspect of ETVs raises unique legal issues. Sutherland’s financial services attorneys work closely with attorneys from the firm’s tax, commodities and derivatives practices to help clients successfully develop, launch and operate differing types of ETVs.
Yet another variation of the ETF is the exchange-traded note. ETNs are similar to ETFs and ETVs in that the shares trade in the secondary market and seek to provide returns based on underlying securities, commodities or other indexes. They differ in that they are notes constituting the general debt obligation of an issuer, typically a commercial bank. Sutherland’s financial services and tax attorneys have experience advising exchange-traded product sponsors on issues associated with the structure of ETNs.
Our Experience
Sutherland attorneys have extensive experience advising clients on all legal matters pertaining to the formation, registration, operation, distribution and restructuring of ETFs and other exchange-traded products, including:
- New Product Launches – product development (including tax and other structural issues), agreements with service providers, securities and commodities pool filings, board-related documentation, compliance materials, exemptive orders and no-action letters, exchange listing requirements, and intellectual property and licensing issues.
- Existing Products – ongoing regulatory matters, reporting and filing requirements, sales practices, board reviews and approvals, general regulatory compliance, investment advisory and sub-advisory arrangements, service and selling agreements, advertising and other marketing communications.
- Compliance Issues – reporting, regulatory compliance, and compliance programs.
- Industry and Regulatory Developments – regulations, SEC no-action and interpretive letters, and other regulatory developments and industry initiatives.
- Distribution – federal and state laws relating to distribution of products, and agreements with representatives of all distribution channels.
- Derivatives – master agreements, model documents and documentation policies, standardized collateral agreements, and other credit support arrangements.
- Tax – federal, international, state and local tax laws affecting exchange-traded products.
Exchange-Traded Funds Brochure
© 2012 Sutherland Asbill & Brennan LLP
