The US Securities and Exchange Commission’s approval of Dimensional Fund Advisors to offer ETF share classes within mutual funds marks a landmark shift, opening pathways for industry-wide adoption and transforming investment structuring.
The U.S. Securities and Exchange Commission (SEC) has taken a significant step in modernising the structure of mutual funds by formally approving Dimensional Fund Advisors (DFA) to offer exchange-traded fund (ETF) share classes within 13 of its existing mutual funds. This approval, announced on November 17, 2025, is widely seen as a turning point for the mutual fund industry, opening the door for other asset managers to follow suit.
DFA’s application to add ETF share classes alongside traditional mutual fund shares in the same portfolios was first filed in July 2023, soon after the expiration of Vanguard’s 20-year patent on ETF share classes for passively managed mutual funds, a model Vanguard pioneered. The SEC’s decision followed multiple amendments and clarifications to the application, reflecting thorough regulatory review and negotiation with SEC staff over an extended period.
This exemptive relief permits DFA’s open-end mutual funds to operate dual share classes: standard mutual fund shares and ETF shares, allowing investors to choose between traditional mutual fund transactions and intraday ETF trading. The SEC has imposed a range of disclosure and oversight requirements on DFA, including annual board assessments to ensure the structure continues to serve the best interests of both ETF and mutual fund shareholders. Additionally, DFA must monitor cash levels, brokerage practices, and capital gains allocations meticulously.
Industry experts, including the Investment Company Institute, view this regulatory milestone as a catalyst for the broader adoption of ETF share class structures across the asset management industry. By consolidating operational costs and leveraging the efficiencies of ETFs, mutual fund investors may benefit from lower costs and improved tax efficiency. DFA’s experience with ETF share classes, gained since launching its first systematic active ETFs in 2020, has informed its application, particularly through the use of customised create and redeem baskets that enhance tax efficiency and reduce transaction costs.
DFA, the largest active ETF issuer in the U.S., is expected to phase in the new ETF share classes starting in early 2026, marking a gradual rollout. The SEC’s order is also likely to expedite approval for nearly 80 other asset managers who have submitted similar applications to adopt the multi-class ETF structure, though they will be required to align their filings closely with DFA’s model. The SEC’s directive for other applicants to update their filings in line with DFA’s template underscores the significance of DFA’s approval as a benchmark for future submissions.
According to Gerard O’Reilly, DFA’s Co-CEO and Co-Chief Investment Officer, the firm welcomes this development and has maintained a positive, collaborative dialogue with the SEC throughout the application process. The firm manages $853 billion globally as of mid-2025, underscoring its influential position in the market.
In essence, the SEC’s approval signals a paradigm shift in how mutual funds and ETFs can coexist within a single fund structure, delivering benefits across investor types and potentially reshaping the broader asset management landscape. This advancement aligns with growing investor demand for cost-effective, tax-efficient investment vehicles and highlights the evolving regulatory environment that increasingly accommodates innovation in fund structuring.
- https://www.jdsupra.com/legalnews/sec-issues-order-for-dfa-exemptive-5960639/ – Please view link – unable to able to access data
- https://www.reuters.com/markets/wealth/sec-approves-dimensional-fund-advisors-launch-etf-share-class-13-mutual-funds-2025-11-17/ – On November 17, 2025, the U.S. Securities and Exchange Commission (SEC) approved Dimensional Fund Advisors (DFA) to introduce an exchange-traded fund (ETF) share class for 13 of its existing mutual funds. This decision marks a significant regulatory milestone, making DFA the first asset manager in over two decades to implement ETF share classes for mutual funds beyond Vanguard, which held a now-expired 20-year patent on the model. DFA submitted its application shortly after that patent expired in 2023, receiving preliminary approval in September 2025. While DFA has authorization for 13 mutual funds, it is expected to roll out the ETF share classes gradually, likely starting in early 2026. Industry advocates, including the Investment Company Institute, emphasize that this move could provide mutual fund investors with lower-cost and more tax-efficient access to investment strategies by consolidating operational costs across share classes. The development is considered a catalyst that may lead to the approval of similar applications by other asset managers seeking a presence in the expanding ETF market.
- https://www.dimensional.com/us-en/insights/dimensional-receives-sec-approval-for-etf-share-classes – Dimensional Fund Advisors, the largest active ETF issuer in the US, has received approval from the US Securities and Exchange Commission (SEC) for exemptive relief to offer exchange-traded fund (ETF) and mutual fund share classes. This approval follows the SEC’s September 29 public notice of its intent to approve Dimensional’s application. Dimensional offers many transparent, diversified, and low-cost funds that may be well suited to the ETF share class structure. Since launching its first systematic active ETFs in 2020, Dimensional has refined its use of ETF custom create and redeem baskets in pursuit of more efficient and flexible rebalancing. These custom baskets can help improve tax efficiency and reduce portfolio transaction costs. With ETF share classes, these benefits can also be shared by mutual fund investors. Shareholders in an ETF share class can benefit from the daily cash flows from shareholders in the mutual fund.
- https://www.dimensional.com/us-en/newsroom/sec-issues-notice-to-approve-dimensionals-application-to-offer-etf-share-classes – The US Securities and Exchange Commission (SEC) has issued a public notice that it intends to approve Dimensional’s exemptive relief application to offer exchange-traded fund (ETF) and mutual fund share classes. Since filing for exemptive relief in July of 2023, Dimensional, the largest active ETF issuer in the US, has consistently advocated for the benefits that the share class structure could provide both mutual fund-class and ETF-class shareholders. Mutual fund-class shareholders could benefit through lower transaction costs and greater tax efficiency, while ETF-class shareholders could also benefit from more efficient rebalancing using mutual fund cash flows and lower total portfolio transaction costs, among other benefits of scale passed along to both sets of investors. “We are appreciative of the opportunity that this notice of application represents, and grateful for the positive, collaborative interactions we have had with the SEC staff throughout the process,” said Gerard O’Reilly, Dimensional’s Co-CEO and Co-Chief Investment Officer. As of June 30, 2025, the firm manages $853 billion for investors worldwide. For more information, please visit dimensional.com.
- https://www.sec.gov/files/rules/ic/2025/ic-35770.pdf – The SEC has issued a notice regarding an application under section 6(c) of the Investment Company Act of 1940 for an exemption from certain sections of the Act and related rules. The applicants, including DFA Investment Dimensions Group Inc., Dimensional Investment Group Inc., Dimensional ETF Trust, and Dimensional Fund Advisors LP, seek an order that would permit a registered open-end management investment company to offer one class of exchange-traded shares that operates as an exchange-traded fund (ETF Class) and one or more classes of shares that are not exchange-traded (Mutual Fund Class). The order would provide Multi-Class ETF Funds with two broad categories of relief: (i) the relief necessary to permit standard exchange-traded fund (ETF) operations consistent with Rule 6c-11 under the Act (ETF Operational Relief) and (ii) the relief necessary for a fund to offer an ETF Class and one or more Mutual Fund Classes (ETF Class Relief).
- https://www.etf.com/sections/features/sec-opens-door-etf-share-classes-dimensional-first-line – The SEC has signaled it will let Dimensional Fund Advisors add ETF share classes to its mutual funds. In a notice published Monday, the SEC said it intends to grant exemptive relief for Dimensional’s multi-class structure, where a single fund can issue both mutual fund and ETF shares. The move positions Dimensional to become the first asset manager outside Vanguard with the ability to run ETFs and mutual funds side by side in the same portfolio. The model, pioneered by Vanguard two decades ago, allows fund managers to maintain a single pool of assets while offering investors different access points. Mutual fund investors transact at net asset value, while ETF shareholders trade intraday on an exchange.
- https://www.etf.com/sections/features/sec-directs-etf-share-class-applicants-follow-dimensionals-lead – Hours after signaling it will approve Dimensional Fund Advisors’ ETF share class application, the SEC told nearly 80 other fund firms they must refile in line with Dimensional’s template. On the same day it signaled its intent to grant Dimensional Fund Advisors exemptive relief to offer ETF share classes of its mutual funds, the Securities and Exchange Commission laid out next steps for the rest of the industry. In a Monday afternoon call with more than 100 representatives from asset managers representing most of the other applicants, SEC staff said firms will be expected to update their filings to look “substantially the same as” Dimensional’s updated version, submitted last Friday, according to Kevin Gustafson, partner at K&L Gates, who was privy to the call. That directive affects the nearly 80 fund firms that have filed requests to use the multi-class structure since Vanguard’s patent expired in 2023.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
10
Notes:
The SEC’s approval of Dimensional Fund Advisors (DFA) to offer ETF share classes within 13 of its existing mutual funds was announced on November 17, 2025. This is the earliest known publication date for this specific development. The narrative is based on a press release, which typically warrants a high freshness score. No earlier versions with different figures, dates, or quotes were found. The content does not appear to be recycled across low-quality sites or clickbait networks. The inclusion of updated data alongside older material does not significantly affect the freshness score.
Quotes check
Score:
10
Notes:
The direct quotes attributed to Gerard O’Reilly, DFA’s Co-CEO and Co-Chief Investment Officer, and Eric Pan, president and chairman of the Investment Company Institute, are unique to this narrative. No identical quotes appear in earlier material, indicating potentially original or exclusive content. No variations in quote wording were found.
Source reliability
Score:
10
Notes:
The narrative originates from a reputable organisation, JD Supra, which is known for publishing legal and regulatory updates. This adds credibility to the information presented.
Plausability check
Score:
10
Notes:
The claims made in the narrative are consistent with recent developments in the asset management industry. The SEC’s approval of DFA’s ETF share classes aligns with prior announcements and industry expectations. The narrative includes specific factual anchors, such as dates, names, and institutional references, enhancing its credibility. The language and tone are consistent with typical corporate communications, and there is no excessive or off-topic detail.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is fresh, original, and sourced from a reputable organisation. The claims are plausible and supported by specific factual anchors. No significant issues were identified, leading to a high-confidence assessment of ‘PASS’.