New York, NY — As the global Exchange-Traded Product (ETP) industry surpasses the $10 trillion asset milestone, the mood at the 14th Annual ETP Forum was one of cautious optimism. Nowhere was this clearer than during the highly anticipated panel, “ETF Legal & Share Class Structures: A Regulatory Crossroads,“ where industry veterans warned that while the market is maturing, the regulatory hurdles are becoming increasingly complex.
Moderated by Matt Bucklin of ExchangiFi, the session featured legal and product experts from Ultimus Fund Solutions, The Nottingham Company, Seward & Kissel LLP, and ETFbook. The discussion centered on a pivotal shift in fund formation: the resurgence of the multi-share class model. With recent regulatory approvals signaling a potential thaw from the SEC, panelists debated whether this structure could soon allow a wave of mutual funds to seamlessly add ETF share classes, fundamentally reshaping distribution strategies for asset managers.
Beyond structural innovation, the “hot topic” of the conference—Section 351 exchanges—dominated the conversation. Panelists highlighted how this decades-old tax code provision is being repurposed to solve a modern problem: “capital lock.” By allowing investors to swap concentrated stock positions for diversified ETF shares without immediate tax consequences, 351 exchanges are becoming a critical tool for high-net-worth clients. However, experts cautioned that navigating the strict “25/50 diversification tests” requires precise legal maneuvering, transforming routine fund launches into complex exercises in regulatory gymnastics.
The panel also addressed the tightening compliance net, specifically the SEC’s updated Names Rule. As regulators demand stricter alignment between a fund’s name and its underlying assets, issuers are facing new pressures to justify their strategies or face rebranding. Despite these headwinds, the consensus from the stage was clear: the legal landscape is shifting, but for issuers willing to innovate, the opportunities have never been greater.