Active Funds and Other Changes in the ETF Industry

by Tom Lydon and Charles Rotblut, CFA

Tom Lydon is editor and publisher of the ETF Trends website. I spoke with Tom recently about developments in the exchange-traded fund (ETF) universe.

Charles Rotblut (CR): It seems that, in part, the future growth in actively managed exchange-traded funds will be dependent on how the SEC applies the so-called ’40 act. Can you provide a brief explanation of what this act is and how it applies to ETFs?

Tom Lydon (TL): The Investment Company Act of 1940 set standards by which investment companies should be regulated. The standards dictate how investment companies operate (promotion, reporting, requirements, pricing and allocation). The Dodd-Frank Act of 2010 overhauled the 1940 act to provide more consumer/investor protection and uniform standards for products.

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Tom Lydon is editor and publisher of ETF Trends ( and president of Global Trends Investments (
Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at


Charles from Florida posted over 2 years ago:

I'm still not clear on how an exchange traded fund differs from a closed end investment company.If an exchange traded fund's price is set by the marketplace how does it receive additional assets after trading begins?

Jim Maccrate from New York posted about 1 year ago:

I have a major problem with ETFs.

Who is keeping track of who owns what?

Do you trust the accounting industry? Sec? Who is tracking ownership?

The auditors and regulators (polticians) could not stop the financial crisis from happening.

I want someone to show me the math to show me the ownership of all the shares in ETFs.

I want the shares in my name...

Just a thought to ponder...

Charles Rotblut from Illinois posted about 1 year ago:


I'm not sure what you are asking about in terms of ownership.

If you are talking about the shares themselves, the ETF shares are registered in your broker's name. You can ask your broker to transfer the shares to your name. If you do this and want to sell the shares in the future, you will have to transfer the shares back to your broker. It's mostly a matter of paperwork, though there might be a fee involved. Speak your broker and they will be able to assist you.


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