Demystifying Marketing Restrictions for CITs

Terry Flanagan

In a new whitepaper, law firm Eversheds Sutherland explores the marketing restrictions for Collective Investment Trusts (CITs) and whether the registration and dissemination of trust data on NFN and runs afoul of current  marketing restrictions set by federal securities and banking regulations.

CITs are on a steady growth trajectory. According to survey data from Coalition of Collective Investment Trusts (CCIT) and Cerulli Associates, CIT assets stood at $3 trillion as of year-end 2018, with a compound annual growth rate (CAGR) of 7.25% over a five year period ending in 2018.

In an effort to bring more transparency to this market, the  Nasdaq Fund Network (NFN), a platform that facilitates the collection and dissemination of critical data for investable products, expanded its coverage to include CITs. NFN generates tickers for CITs and provides static and dynamic trust and performance data. While generally well-received by the investment community, there were questions about whether inclusion of CITs on NFN was consistent with marketing restrictions applicable to CITs.

CITs are only available to qualified retirement plans, such as 401(k) plans and certain government plans. Eversheds Sutherland’s paper analyzes the applicable regulations, including SEC no-action letters, governing CITs and concludes that there are sound arguments that CIT registration, distribution, and fact sheet production by NFN are not inconsistent with those regulations.

Read the whitepaper here >

“We are of the view that there are sound arguments that demonstrate that the availability of CIT tickers on Nasdaq and the production of fact sheets will not run contrary to SEC staff views,” Eversheds Sutherland said. “There are no specific prohibitions on (i) the use of tickers for CITs; or (ii) the preparation of fact sheets in respect of CITs.”

NFN, which is accessible by more than 100 million investors globally, provides daily data for financial instruments, including mutual funds, money market funds, unit investment trusts (UITs), annuities, Managed Accounts (SMAs/UMAs available to retail), CITs, alternative investments, and structured products registered with Nasdaq. Product profiles are updated with daily performance, net asset value, valuation and strategy-level reference data. CITs also have a ticker symbol aligned to them, making them searchable on a variety of institutional market data platforms and financial web portals, such as Yahoo! Finance, CNBC, Wall Street Journal, MarketWatch, Barrons, Refinitiv, Bloomberg and FactSet, which empowers investors to find their relevant investment performance data.

Wilmington Trust was the  first firm to register CITs on NFN, successfully rolling out more than 200. The push for greater transparency has been well received in the industry, with more than 100 additional CITs registered since the launch.

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