The SEC Division of Corporation Finance granted no-action relief from SEA Rule 14e-5 ("Prohibiting Purchases Outside of a Tender Offer") requirements on exchange-traded funds ("ETF"). The relief is granted for authorized participants transacting in shares issued and redeemed by the Doubleline ETF based on the fact that the authorized participants will not know what shares are actually held by the ETF and, thus, could not be acting with a manipulative intent.
As described in its letter to the SEC, the ETF could not rely on the relief generally granted to funds that comply with ICA Rule 6c-11 ("Exchange-Traded Funds") because the ETF does not disclose its portfolio holdings on a daily basis.
The relief is subject to the following conditions:
- the purchase of subject securities by a broker-dealer acting as a dealer-manager will not be for the purpose of facilitating a tender offer;
- any purchase of portfolio securities by a dealer-manager during a tender offer will be effected as an adjustment to a basket of securities in the ordinary course of business as a result of a change in the composition of the ETF's portfolio; and
- except for the relief granted in the no-action letter, any dealer-manager of a tender offer will comply with SEA Rule 14e-5.
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