ETF investors frequently consider market trends and ETF rules changes while investing. What about Supreme Court cases? The Supreme Court’s sweeping decision in Loper Bright Enterprises v. Raimondo which overturned the landmark Chevron v. Natural Resources Defense Council decision, put an end to so-called “Chevron Deference,” in which courts defer to regulator expertise. What kind of impact, then, might that have on ETFs?
The Supreme Court, Chevron, and ETFs
ETFs fall under the purview of the Securities and Exchange Commission (SEC), with ETFs themselves regulated under the Investment Company Act of 1940. Given how many people learned about Chevron Deference from the media coverage of the case, it may be fair to ask how much it will impact ETFs. The answer? Not very much – for now.
According to Jeremy Senderowicz, shareholder at Vedder Price and attorney with significant ETF experience, the end of Chevron deference will have “very little” impact on ETFs.
“There have been very few court cases or legal challenges to ETF regulation over the years, per se,” he said.
“The biggest exception (was) the Grayscale decision last year, but even that decision was not premised on Chevron at all,” he added, referring to District of Columbia Court of Appeals decision that ruled to allow Grayscale Investments to create a spot Bitcoin ETF.
Per Senderowicz, ETF regulation has not really relied on Chevron deference in the past. To him, ETF regulation “basically has never involved a contested interpretation of a statute.
Advisors to Face an Impact?
That said, the financial industry at large has yet to see the full impact of the decision. One area that may see an impact could be financial advisors. According to Matt Schatzow, founder at RIA Lawyers LLC, there might be challenges under the Advisors Act, or, barring that, potentially more aggressive action from registrants therein.
“You might not see challenges necessarily. You might just see registrants get a little bit more aggressive in some of the things that they do,” he said.
“It would basically just force the SEC to either admit, yeah, their position wasn’t really grounded in the law, or to file suit in federal court and challenge the practice,” he added. “That’s really where I would expect to see some changes or movement, if you will.”
For ETFs specifically, however, Schatzow also does not see broad based challenges to how ETFs operate, even with the overturning of Chevron deference.
Given how drastically the case changes how the U.S. government works, the case’s impact will have a broad impact. According to Senderowicz and Schatzow, however, ETFs will likely not be an arena where the case has an immediate impact.
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