The U.S. Securities and Exchange Commission (SEC) has published a planned order—currently open to public comment before any changes or developments—that specifically applies to Dimensional Fund Advisors and allows the firm to add exchange-traded share classes to mutual funds. According to experts, this is a discussion the industry has long anticipated.
“The Commission is taking a long-awaited step toward modernizing our regulatory framework for investment companies, reflecting the evolution of collective investment vehicles from being primarily daily redeemable funds to exchange-traded funds (ETFs),” said Commissioner Mark T. Uyeda.
As explained by Reuters, under the proposed change, a mutual fund could offer investors the opportunity to participate in its investment portfolio in the form of an exchange-traded product, known as an ETF share class. “Investors would be able to buy and sell shares of the exchange-traded mutual fund throughout the day at market price through their brokerage accounts, instead of waiting for a mutual fund order to settle at the end-of-day price. This has the potential to open access to a range of existing funds for investors who prefer owning ETFs due to their low cost, tax advantages, or liquidity,” they noted.
Offering different share classes of the same mutual fund is not new. As Reuters points out, these classes are currently often targeted at different investor groups or carry varying fee structures. However, they note that the change could blur the line between exchange-traded funds and traditional mutual funds.
In Uyeda’s view, this is a principled modernization. He emphasized that the application includes several safeguards: board oversight, adviser reporting, conflict monitoring, and investor disclosure. “These are not mere administrative formalities—they are essential guardrails and uphold the fiduciary duty,” he added.
For many in the industry, this planned order signals the SEC’s intent and marks the direction of change the agency aims to pursue. In this regard, Uyeda was clear: “The publication of this notice represents a substantive step forward, not just a procedural formality. It’s a signal that the Commission is willing to reexamine outdated restrictions, embrace innovation, and consider an exemption that could equally benefit investors, fund sponsors, and markets. It reflects the same innovative spirit that led to the creation of the first ETF more than three decades ago.”
