The SEC's refusal of Hungtington's request to transform an existing mutual fund to an ETF shows that regulators should overhaul the Investment Act of 1940, writes MarketWatch columnist Chuck Jaffe.

He writes that the approval from the regulators could have made it easier for firms to convert funds and would have sent out a message of encouragement.

Jaffe further writes that it has become "almost universally accepted in the industry that the ETF structure is better for shareholders," even though mutual funds still run the show. He emphasized that both still fall under the "funds" category.

When the regulators nixed the request, they provided no guidance or explanation as to what the problems were.

Jaffe writes:

The antiquated way that ETFs get approved is holding back the evolutionary process. It's unclear whom that benefits, but it's distinctly not in the best interest of consumers, who are being held hostage in the ETF revolution because of the antiquated rules.

 

Edited by: HFD


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