Which statement is correct regarding the regulatory registration of ETNs and ETFs?

• A. ETNs are registered under the Investment Company Act of 1940; ETFs under the Securities Act of 1933
• B. ETNs are registered under the Securities Act of 1933; ETFs under the Investment Company Act of 1940
• C. Both are registered under the Securities Act of 1933
• D. Neither is registered with the SEC

Answer: (B)

ETNs and ETFs are regulated under different SEC statutes because of their distinct structures. An ETN is a debt obligation issued by a bank, so its sale as a security falls under the Securities Act of 1933. An ETF is an investment company that pools investors’ money, so it is regulated as an investment company under the Investment Company Act of 1940. This is why ETNs are registered under the Securities Act of 1933 and ETFs under the Investment Company Act of 1940.