On June 24, 2015, the SEC staff issued a no-action letter stating that it would not recommend enforcement action to the Commission against certain trusts consisting of individual funds operated as ETFs or their adviser if the funds include “Long/Short Indexes” (including indexes that use a 130/30 or similar investment strategy) in the definition of “Index” in the ETFs’ existing exemptive orders (the “Orders”). The adviser that requested the relief, SSgA Funds Management, Inc. (“SSgA FM”), serves as investment adviser to SPDR Series Trust and SPDR Index Shares Fund (each a “Trust” and, together, the “Trusts”).
Each Trust consists of individual series that are operated as ETFs pursuant to the Orders. Under the terms of the Orders, the ETFs may invest in domestic equity securities, foreign equity securities and fixed-income securities. The Orders do not specifically address the possibility of the Funds tracking indexes that include both long and short positions in securities, although the SEC has issued numerous exemptive orders that permit ETFs to track Long/Short Indexes.
The no-action letter permits the ETFs to include Long/Short Indexes in the definition of “Index” in the existing Orders. In providing the no-action relief, the SEC staff noted that the no-action position would not apply to any index-based ETF that operates in a manner that is similar to funds that are currently known as “leveraged,” “inverse,” “inverse leveraged,” or “geared” funds.