SEC Opens Door for ETF Share Classes, Signaling Broader Adoption

The SEC has proposed an order allowing Dimensional Fund Advisors to offer ETF share classes tied to existing mutual funds, marking a pivotal shift in regulatory stance. The move, now open for public comment, paves the way for nearly 80 similar applications and ends Vanguard's two-decade exclusivity over the dual-class structure following its patent expiration in May 2023.

Asset managers gain a streamlined path to market: instead of launching standalone ETFs, firms can now attach ETF share classes to existing mutual funds. This unlocks real-time trading, tax efficiencies, and lower costs for retail investors—without the years-long process of building track records from scratch. "There is no turning back," says Todd Rosenbluth of VettaFi, underscoring the industry's anticipation for this moment.