UPDATE 2-SEC partially lifts moratorium on actively managed ETF

Thu Dec 6, 2012 6:50pm EST
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* Agency will still not review applications for leveraged ETFs

* ETFs can now use derivatives again

By Jessica Toonkel and Suzanne Barlyn

NEW YORK, Dec 6 (Reuters) - The U.S. Securities and Exchange Commission is partially lifting an almost three-year-old moratorium on applications for actively managed, exchange-traded funds, creating an opportunity for fund managers to use derivatives when they launch them.

Exchange-traded funds, or ETFs, are similar to mutual funds, but trade on exchanges on a real-time basis.

Only 37 of 1,267 ETFs in the United States are actively managed, according to Lipper, a subsidiary of Thomson Reuters Corp.. They represent 0.93 percent of the $1.2 trillion in assets in U.S. ETFs.

In March 2010, when the SEC began reviewing the risks posed by how mutual funds and ETFs used derivatives, the commission placed a moratorium on all applications from firms looking to open ETFs that used such instruments, including credit default swaps.

On Thursday, the director of the SEC's investment management division, Norm Champ, told a conference hosted by The American Law Institute Continuing Legal Education Group in New York that the moratorium, for the most part, would be lifted.

Now, after almost three years the agency is lifting the moratorium for the most part, Norm Champ, director of the investment management division, said in New York on Thursday at a conference hosted by The American Law Institute Continuing Legal Education Group.   Continued...