The cease-trade order highlights the need for investors to stay on top of disclosures and diversify not only ETFs but also their providers
The OSC has said the CTO remains in place until “the company or individual corrects the deficiencies or meets certain conditions.”
The CTO comes at a time when the ETF industry is expanding rapidly, driven in part by a growing number of thematic ETFs like those Emerge offers. The provider, which operates in Toronto and New York, has six Emerge ARK ETFs, subadvised by Cathie Wood’s ARK Investment Management LLC, and launched five EMPWR ETFS last year, all of which are managed by women and have an environmental, social and governance focus.
And while it’s a company-specific issue, Mr. Rebetez says the Emerge CTO could cast a pall across the industry, in particular over smaller providers with fewer assets and resources. “We want to make sure people realize that this could happen to any investment fund or any product,” she says. “It’s a mechanism that the regulators use, it’s not an ETF-specific issue.”“It has nothing to do with the investments that Emerge made or the portfolios,” she says. “We want to make sure that distinction is there. So that the smaller ETF issuers don’t get painted with the same brush … because we don’t know what the issues are.
Mr. Sneddon, who doesn’t hold Emerge funds, says it’s also a reminder that the more niche your product is when launched, the harder it will be to convince investors to buy and stay invested if issues arise.Mary Hagerman, senior portfolio manager and investment advisor with The Mary Hagerman Group at Raymond James Ltd. in Montreal, doesn’t believe the Emerge CTO will lead to widespread investor concern across the broader ETF industry.
She says the situation should also reinforce the need for advisors and investors to look more closely at what they’re buying and be comfortable with the various risks, including regulatory decisions.
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