Most ETFs are registered under the Investment Act of 1940 – often referred to as the ’40 Act – as open-end investment companies. As such, they are subject to the specific provisions of the ’40 Act as they pertain to open-end funds. However, several of the customary features of an ETF are not consistent with the requirements of the ’40 Act. Thus, a key part of the process in launching any ETF is to receive the required exemptions from these provisions of the ’40 Act.
I'm not an expert, but it seems like it would be easier for Congress to pass a law to make ETFs legal in their customary form, no?
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