House sends safe harbor ETF bill to Trump

Legislation would allow brokerages to produce fund reports not classified as sales offers

Sep 28, 2017 @ 1:07 pm

By John Waggoner

The U.S. House of Representatives passed the Senate's version of the Fair Access to Investment Research Act of 2017, which would let brokers produce exchange-traded-fund analyses without the reports being considered a sales offer. The bill now goes to President Donald J. Trump for his signature.

A similar safe harbor already exists for other investment products such as stocks, corporate debt, closed-end funds and emerging growth companies.

"During my three decades in the financial industry, I witnessed the explosive growth in the exchange-traded funds (ETF) industry and the lack of available research caused by outdated securities law," said Rep. French Hill, R-Ark., author of H.R. 910, the bill's original version. Rep. French said the bill would remove barriers to investment and encourage capital formation.

(More: iShares dominating ETF inflows for 2017.)

Brokers would be able to provide short summaries of ETFs that explain expense ratios and other features. "I don't see how this could be viewed as anything but a positive from an investor's point of view," said Ben Johnson, Morningstar's director of global ETF research. "The greater the number of eyeballs scrutinizing these funds, the more a net positive for the end investor."

However the legislation would provide the safe harbor even if the broker or dealer participates in the registered offering of the investment fund's securities. That could be somewhat problematic, Mr. Johnson said. "As we've seen with sell-side equity research, there's plenty of flattery out there. Typically, if they don't have something nice to say, they won't say it."


What do you think?

View comments

Recommended for you

Featured video


What makes now an ideal time to talk about philanthropy?

With the end of the year approaching, advisers need to be thinking about charitable giving. Schwab's Kim Laughton and JMG's Melissa Walsh discuss some new opportunities to consider.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print