Exchange-Traded Funds

An exchange-traded fund (ETF) is a pooled investment vehicle with shares that can be bought or sold throughout the day on stock exchanges at market-determined prices. Investors can buy or sell ETF shares through a broker, just as they would the shares of any publicly traded company.

ETFs are commonly structured as open-end funds and governed by the same regulations that govern other open-end funds (mutual funds). Before they can commence operations, however, they must receive exemptive relief from the U.S. Securities and Exchange Commission from certain provisions of the Investment Company Act of 1940.

An ETF director’s responsibilities are similar to those of mutual fund directors, although with some differences and different areas of focus. Like all fund directors, ETF directors have a fiduciary duty to their fund and serve the interests of fund shareholders.

For more information about the ETF board’s oversight responsibilities, see Board Oversight of Exchange-Traded Funds.