ETF Providers Can Avoid SEC Hammer

This theme has picked up considerably in 2010 with the launch of a number of unique international products including the Market Vectors Egypt ETF (EGPT), the IndexIQ Canada Small Cap Index Fund (CNDA), the IndexIQ Australia Small Cap Index Fund (KROO)and the Global X China Materials ETF (CHIM), one of many China sector funds offered by firm. On Wednesday, Van Eck will launch its newest international product: the Market Vectors Latin America Small Cap Index ETF (LATM) .

For now, no ETF newcomer, whose plans were put on ice by the SEC, has shown signs of joining this trend. However, the benefit of offering new alternative international products is two-fold: the nature of these types of funds allows ETF providers to justifiably boost expense ratios while at the same time allowing investors access to previously untapped segments of the global market.

Of course, with these and any new launches, investors need to be conscious of volume.

With the regulatory assault on derivative-backed ETFs still dragging on, providers planning to launch active and leveraged products may want to consider weighing other options in their quest to make an impact on this lucrative industry. By introducing alternative international instruments, they can not only charge high expense ratios while avoiding the SEC's hammer, but also provide investors with exciting new investing opportunities.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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