Asset managers VanEck, 21Shares and Canary Capital have jointly approached the US Securities and Exchange Commission (SEC) seeking for a reinstatement of the first-to-file principle i.e. a regulatory approach that ensures exchange-traded products (ETP) applications are reviewed and approved in the order they are submitted. The trio of prominent investment firms claims that the Commission’s recent departure from this standard has stifled innovation and created an uneven playing field, among other negative consequences.

SEC’s Shift From ‘First-To-File’ Principle Signals Favoritism: ETF Issuers

In an email addressed to SEC Chairman Paul Atkins on June 5, CEOs of VanEck, 21Shares and Canary Capital in the persons of Jan van Eck, Duncan Moir, and Steven McClurg outlined a deep grievance with the Commission’s abandonment of its first-to-file principle and the adoption of simultaneous approval approach towards recent ETP applications.

The letter explained that the “first-to-file” rule acted as a strong pillar of fairness which supported innovation, and a first-mover advantage. This approval model allegedly created a competitive market landscape as smaller asset managers were able to seize significant market shares of a particular product to increase their general standing.

A statement from the letter explains:

…If multiple sponsors were working in parallel on similar ideas, those filing first were first in line to receive market approval. This has enabled the ETP industry to grow to $15.4 trillion in investor assets. Newer, innovative companies like Wisdomtree have been able to become industry leaders; it’s not necessarily established mutual fund companies that have gained high ETP market share.

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Author: Semilore Faleti