Wasatch Wants an ETF Class on Its Mutual Funds. The Ten-Week Turnaround Is the Story.
Wasatch Asks the SEC to Bolt an ETF Class Onto Its Mutual Funds
Wasatch Funds Trust and Wasatch Advisors LP have asked the SEC for permission to offer exchange-traded shares as a class of their existing open-end mutual funds. The Commission published notice of the application on September 21, 2026 as FR Doc. 2026-19212, and interested persons have until 5:30 p.m. Eastern time on October 13, 2026 to request a hearing.
But here is the part the filing coverage keeps missing. The application was filed on July 8, 2026 and amended on September 10, 2026, and the SEC issued its notice on September 16, 2026 as Investment Company Act Release No. 36332, File No. 812-16051. Roughly ten weeks from filing to public notice is not the pace of contested, bespoke exemptive relief. It is the pace of a template.
Wasatch Advisors LP (CRD No. 106081, SEC No. 801-11095) is a Salt Lake City adviser with a long-established mutual fund complex, per its Form ADV record. Here is what the application actually asks for, why the Commission has to issue an order at all, and what a fund sponsor should decide before the queue clears.
The Section 18 Problem: Why a Share Class Needs an SEC Order
Most operators assume the multi-class ETF is a distribution decision. It is not. It is a statutory problem, and the relief list in the application tells you exactly how many places the Investment Company Act of 1940 breaks when you attach exchange-traded shares to a mutual fund.
What the application actually asks for
Applicants seek an order under section 6(c) exempting them from sections 2(a)(32), 5(a)(1), 18(f)(1), 18(i), 22(d), 22(e), and rule 22c-1, and under sections 6(c) and 17(b) from sections 17(a)(1) and 17(a)(2), according to Release No. 36332. Each of those citations maps to a distinct commercial fact:
- 2(a)(32) and 22(e). ETF shares are redeemable only in large creation units, and only by authorized participants. Retail holders sell on an exchange rather than redeem, which strains the statutory definition of a redeemable security and the seven-day redemption requirement.
- 18(f)(1) and 18(i). A second class with different rights raises the senior security and equal-voting provisions. This is the core structural objection, and it is why a share class cannot simply be added by board action.
- 22(d) and rule 22c-1. Mutual fund shares transact at net asset value under forward pricing. Exchange-traded shares transact at market prices throughout the day. Both cannot be true in the same fund without relief.
- 17(a)(1) and 17(a)(2). In-kind creations and redemptions with affiliated authorized participants are affiliated transactions absent an order under section 17(b).
The operating framework sits on top of rule 18f-3, which governs multiple class plans, and rule 6c-11, the 2019 ETF rule that stand-alone ETFs rely on. Rule 6c-11 does not cover this structure. That gap is precisely what the order fills.
Exemptive Orders Are Doing the Work a Rule Should Do
The Commission had two ways to authorize dual-share-class funds. It could amend rule 6c-11 through notice-and-comment rulemaking and set one condition set for the entire industry. Instead it is processing applications one sponsor at a time. SEC staff guidance issued earlier in 2026 put the count at roughly 50 orders granted against roughly 100 applications filed as of March 17, 2026; that ratio has almost certainly moved since, and no public figure confirms where it stands today.
That procedural choice has three commercial consequences that a rule would not have.
Your launch date is a queue position, not a compliance question. Wasatch moved from filing to notice in about ten weeks. A sponsor that files later inherits whatever the staff's review load looks like then. Competitive timing in this structure is an administrative variable, not a product variable.
Conditions can drift between orders. In serial exemptive practice, the staff refines conditions as applications accumulate. An order issued in the fiftieth batch may carry obligations the fifth did not. Reading the most recent notices matters more than reading the earliest ones.
An order binds you individually. A rule creates a generally applicable standard. An order is conditional relief granted to named applicants, and every condition in it becomes an ongoing compliance obligation enforceable against that complex specifically.
Wasatch is a repeat user of this process, which is worth separating clearly. A different application, File No. 812-16004, produced order IC-36166 granting an exemption from section 15(a), effective immediately on May 26, 2026. That proceeding concerned advisory agreement approval mechanics, not ETF share classes. The two are frequently conflated in trade coverage. They share applicants and nothing else.
What a Fund Complex Should Decide Before the Order Arrives
If you run a mutual fund complex and have not filed, the decision in front of you this quarter is not whether the structure is coming. It is whether your operating infrastructure can absorb it on the day the order is granted.
Decisions that belong to the executive team
- Expense allocation and cross-subsidy. A multiple class plan under rule 18f-3 must allocate expenses so one class does not subsidize the other. Transfer agency and intermediary servicing costs sit almost entirely on the mutual fund class. Model that before the board sees the plan, not after.
- Tax treatment of in-kind redemptions. In-kind redemptions at the ETF class generate realized-gain management that benefits every shareholder in the fund, including the mutual fund class. Confirm how your tax team treats that, and confirm the disclosure follows the math.
- Intermediary and distribution contracts. Existing selling agreements, revenue-sharing arrangements, and platform contracts were written for a single-class-family world. Most will need amendment before an ETF class trades.
- Board process and materials. The board must approve the multiple class plan and evaluate conflicts between classes. Build the record now; a thin board file is a durable examination finding.
- Whether to be heard on a pending application. Any interested person may request a hearing on the Wasatch application by 5:30 p.m. Eastern time on October 13, 2026. That window is short and it is real.
Sponsors preparing a filing generally start by mapping the current notice conditions against their existing 18f-3 plan and distribution agreements, which is the work registered fund counsel does before the application is drafted rather than after the order is granted.
FinTech Law's private fund counsel team advises on the requirements described above.
Contact FinTech Law to review how this applies to your business.