Correspondence 0001213900-23-022444 from DriveWealth ETF Trust (CIK 0001954014)
DriveWealth ETF Trust (CIK 0001954014)
Date: March 23, 2023 · CIK: 0001954014 · Accession: 0001213900-23-022444
AI Filing Summary & Sentiment
File numbers found in text: 333-268359, 811-23837
Referenced dates: December 15, 2022
Letter
Division of Investment Management 100 F Street, N.E. Washington, DC 20549-4720 Re: DriveWealth ETF Trust File Nos. 333-268359; 811-23837
Dear Ms. Samuel and Mr. Williams:
DriveWealth ETF Trust (the “Trust”) is filing this correspondence to respond to comments of the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”) that were provided in a letter dated December 15, 2022 regarding the Staff’s review of the Trust’s initial Registration Statement on Form N-1A (the “Registration Statement”). The Registration Statement, which was filed with the SEC on November 15, 2022, relates to the Trust and its initial series, DriveWealth ICE 100 Index ETF (formerly, DriveWealth 100) (the “Fund”). For your convenience, we have set forth each comment below, followed by the Trust’s response. Unless otherwise stated, capitalized terms have the same meaning as given in the Registration Statement.
GENERAL
Comment 1: The Registration Statement is missing information and exhibits and contains bracketed disclosures. We may have additional comments on such portions when you complete them in a pre-effective amendment, on disclosures made in response to this letter, on information supplied supplementally, or on exhibits filed in any pre-effective amendment.
Response 1: The Trust acknowledges that the Registration Statement did not include certain information that was not yet known or finalized as of the filing date. The Trust anticipates that the pre-effective amendment to the Registration Statement will provide the information that was previously outstanding, to the extent it is still applicable.
Comment 2: Please advise us if you have submitted or expect to submit any exemptive applications or no-action requests in connection with the Registration Statement.
Response 2: The Trust has not submitted any exemptive applications or no-action requests in connection with the Registration Statement. However, the Trust and the Adviser may in the future apply for an exemptive order from the SEC to permit the Adviser and the Trust’s Board of Trustees to hire, terminate and replace sub-advisers, and to amend the sub-advisory agreements between the Adviser and sub-advisers, without obtaining shareholder approval. The Trust has added disclosure addressing this in the prospectus.
Comment 3: Please include the ticker symbols in EDGAR. Regulation S-T, Rule 313(b)(1).
Response 3: The ticker symbols will be added when, or prior to the time that, the pre-effective amendment to the Registration Statement is filed.
Comment 4: Please provide a copy of the Index methodology for our review.
Response 4: The Index methodology was provided to the Staff by email on March 10, 2023.
Comment 5: Is a party other than the Fund’s sponsor or one of its affiliates providing the Fund’s initial (seed) capital? If yes, please supplementally identify the party providing the seed capital and describe their relationship with the Fund.
Response 5: No party other than the Fund’s sponsor or one of its affiliates is providing the Fund’s initial (seed) capital.
Prospectus
Summary Prospectus
Risk/Return Summary: Fees and Expenses of the Fund
Comment 6. Please delete footnote 1 to the fee table, as the Distribution Plan has not been implemented. The details of the Distribution Plan should instead be disclosed in response to Item 12 of Form N-1A.
Response 6: The footnote has been deleted in response to the comment.
Principal Investment Strategies
Comment 7: The principal investment strategies disclosure describes the Fund’s investment strategies in relatively general terms. Please explain in more detail the types of ETFs or other investments the Fund invests in to track the Index. Please also disclose the strategy the Fund uses to track the Index (e.g. by using a replication or sampling strategy). Please provide this disclosure in summary form in response to Item 4(a), and in additional detail in response to Item 9(b). See IM Guidance Update 2014-08, Guidance Regarding Mutual Fund Enhanced Disclosure (“IM Guidance Update 2014-08”).
Response 7: The disclosure has been modified in response to the comment.
Comment 8: The Fund’s concentration policy is disclosed in response to Item 9(b). Please also summarize this disclosure in Item 4(a). Additionally, please disclose here, and in Item 9: (i) whether the Index is currently concentrated and, if so, disclose the specific industry or group of industries in which the Index is concentrated; and (ii) the Fund’s non-diversification status.
Response 8: Because the Fund will be classified as a diversified company, the disclosure in the prospectus and SAI regarding non-diversification has been removed. The disclosure has also been revised to remove Concentration Risk as a principal risk of investing in the Fund. Further, in response to the comment, Items 4(a) and 9(b) of Form N-1A require disclosure regarding any policy to concentrate in securities of issuers in a particular industry or group of industries. The Trust submits that since the Fund, which will invest all or substantially all of its assets in securities issued by other ETFs, will have a policy to not concentrate in securities of issuers in a particular industry or group of industries (except to the extent that the Index concentrates in an industry or a group of industries), the disclosure regarding its concentration policy is not required to be disclosed in the prospectus. Nevertheless, disclosure regarding the Fund’s policy has been added in response to the comment.
Comment 9: Please provide additional detail here, and in response to Item 9(b), regarding the Index. In particular:
a. Please provide additional detail regarding the selection criteria for Index components, explaining how such components are included or excluded from the Index. In addition, please provide additional detail regarding the proprietary Index methodology that is used to select the ETF components.
b. Please disclose the rebalancing and reconstitution process for the Index, including the frequency thereof.
c. Please disclose the name of the Index Provider, and whether the Index Provider is affiliated or unaffiliated, in the summary principal investment strategies discussion.
Response 9: The disclosure has been modified in response to the comment.
Comment 10: Please disclose the types of cash equivalents the Fund intends to principally invest in. We note, for example, that the Fund includes U.S. Government securities principal risk disclosure in response to Item 9; these securities should have corresponding principal investment strategy disclosure. If these are not principal strategies of the Fund, please move the disclosure out of the summary prospectus.
Response 10: The disclosure has been modified to clarify that the Fund does not invest in cash equivalents as a principal investment strategy.
Principal Risks
Comment 11: Please consider adding principal risk disclosure regarding the risks associated with a relatively-new investment adviser (e.g., the adviser may have limited experience managing registered investment companies; there may not be a long-term track record against which an investor may judge the adviser; a new adviser may experience resource constraints).
Response 11: The disclosure in response to Item 9(c) has been enhanced in response to the comment.
Comment 12: Please tailor ETF Risk disclosure to the Fund’s intended investments. For example:
a) Please clarify that the Fund’s ETF Risk disclosure is applicable both to the Fund and to the underlying ETFs in which the Fund will invest.
b) Please clarify whether any risks listed in this section (e.g., Cash Transactions Risk) are intended to apply to the Fund, to the underlying ETFs in which the Fund will invest, or both.
c) Please include any other applicable risks of investing in other investment companies.
Response 12: The disclosure has been modified to include, as a principal risk factor of the Fund, the risk of investing in other investment companies. In addition, disclosure has been added to include a summary of investment risks of the ETFs in which the Fund may invest.
Comment 13: Please tailor Issuer Risk disclosure to the Fund’s intended investments in shares of ETFs.
Response 13: The disclosure has been modified in response to the comment. In particular, the Trust believes that the disclosure in the risk factor entitled “Investments in Other Investment Companies and ETFs” sufficiently addresses the risk of investing in shares of ETFs.
Comment 14: We note that this section includes Cash and Cash Equivalents Risk. Please consider also adding principal risk disclosure regarding the Fund’s principal investments in money market funds and repurchase agreements, as disclosed in the principal investment strategies section.
Response 14: The disclosure has been revised to clarify that the Fund will not hold cash or cash equivalents as a principal investment strategy. Accordingly, principal risk disclosure has not been added in response to this comment.
Comment 15: Please confirm whether High Portfolio Turnover Risk is applicable to this passively-managed fund. If so, please add corresponding principal strategy disclosure regarding frequent trading; otherwise, please delete. Please also reconcile this risk disclosure with Passive Investment Risk.
Response 15: The disclosure has been revised to clarify that high portfolio turnover risk will not be a principal investment risk.
Comment 16: Disclosure in Authorized Participants Concentration Risk states that, to the extent authorized participants are unable to proceed in creation and redemption transactions and no other authorized participants are able to step forward, “shares of the Fund may be more likely to trade at a premium or discount to net asset value (“NAV”) and possibly face trading halts or delisting.” Please also disclose that this could, in turn, lead to wider spreads between the bid and ask prices of Fund.
Response 16: The disclosure has been modified in response to the comment.
Comment 17: In Cash Transactions Risk, disclosure states that the Fund’s payment of redemptions in cash might cause the Fund to “pay out higher capital gains distributions than ETFs that redeem in-kind.” Please additionally disclose that such redemptions could also cause the Fund to incur brokerage costs it might not have incurred if it made redemptions in-kind. Finally, please also disclose that these brokerage and capital gains costs could be imposed upon the Fund, and thus decrease the Fund’s NAV, to the extent that such costs are not offset by a transaction fee payable by an authorized participant. Consistent with the disclosure of the same risk in response to Item 9, please also revise the first sentence of this risk disclosure to make clear that the Fund effectuates purchases and redemptions primarily for cash, rather than by in-kind delivery of portfolio securities.
Response 17: The disclosure has been revised to clarify that the Fund currently intends to effect creation and redemption transactions on an in-kind basis.
Comment 18: In Premium/Discount Risk, please consider clarifying that intra-day deviation of the market price of the Fund’s shares from NAV can be reflected in a spread between the bid and ask prices for Fund shares.
Response 18: The Trust believes that the existing disclosure is sufficient and has not revised the disclosure in response to this comment.
Comment 19: Please tailor Liquidity Risk disclosure to the Fund’s intended investments in shares of ETFs.
Response 19: The disclosure has been revised in response to the comment. Specifically, Liquidity Risk has been identified as a potential investment risk of an ETF in which the Fund may invest rather than a direct risk of investing in the Fund itself.
Performance Information
Comment 20: Please supplementally identify the broad-based securities market index expected to be used by the Fund in the average annual total returns table.
Response 20: The Trust currently anticipates that the ICE U.S. 500 Index will be used as the broad-based securities market index in the average annual total returns table. The Trust further notes that when the Fund has generated returns for at least one calendar year, the Fund will identify the index in the prospectus as required pursuant to Item 4(b)(2) of Form N-1A.
Portfolio Managers
Comment 21: Please revise the disclosure to state that the portfolio managers are “jointly and primarily responsible” for the day-to-day management of the Fund.
Response 21: The Trust has revised the disclosure in response to the Staff’s comment.
Comment 22: Please provide the information required by Item 5(b) of Form N-1A.
Response 22: The disclosure has been modified to include disclosure about the Fund’s portfolio managers required by Item 5(b).
Statutory Prospectus
Investment Strategies
Comment 23: Form N-1A provides that the principal investment strategies and principal risks required by Item 4 in the summary prospectus should be based on the information given in response to Item 9, and should be a summary of that information. Here, the Fund’s disclosure in Item 9 is substantially identical to disclosure in the summary prospectus. Accordingly, please provide more fulsome disclosure regarding the Fund’s principal investment strategies and risks as required by Items 9(b)(1)-(2) and Item 9(c). If the Fund’s position is that it discloses everything about its principal investment strategies and risks in the summary prospectus, then the Fund has not provided a summary or followed the layered disclosure regime adopted by the Commission. See IM Guidance Update 2014-08.
Response 23: The disclosure has been modified in response to the Staff’s comment.
Additional Risk Information
Comment 24:
We note that certain principal risks discussed in this section do not appear in the summary prospectus principal risk disclosures (e.g., Investments in Investment Companies Risk, Fixed Income Securities Risk, Foreign Investments Risk, U.S. Government Obligations Risk).
a) Please add Investments in Investment Companies Risk to the summary prospectus, given the Fund’s significant investments in ETFs.
b) Please summarize in Item 4(b) all principal risks disclosed pursuant to Item 9(c) and include corresponding principal strategy disclosure pursuant Items 4 and 9 if not already disclosed (e.g., fixed income securities, foreign securities).
c) If some of the risks included in Item 9(c) disclosure are non-principal risks, please clarify which risks in this subsection are principal risks and which are non-principal risks. Alternatively, please move the non-principal risks to the SAI.
d) Please
Show Raw Text
CORRESP
1
filename1.htm
DriveWealth
ETF Trust
15
Exchange Place
10th Floor
Jersey City, New Jersey 07302
March
23, 2023
Ms.
Sally Samuel
Mr.
Matthew S. Williams
U.S.
Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, DC 20549-4720
Re: DriveWealth
ETF Trust
File
Nos. 333-268359; 811-23837
Dear
Ms. Samuel and Mr. Williams:
DriveWealth
ETF Trust (the “Trust”) is filing this correspondence to respond to comments of the staff (the “Staff”) of the
U.S. Securities and Exchange Commission (the “SEC”) that were provided in a letter dated December 15, 2022 regarding the
Staff’s review of the Trust’s initial Registration Statement on Form N-1A (the “Registration Statement”). The
Registration Statement, which was filed with the SEC on November 15, 2022, relates to the Trust and its initial series, DriveWealth ICE
100 Index ETF (formerly, DriveWealth 100) (the “Fund”). For your convenience, we have set forth each comment below, followed
by the Trust’s response. Unless otherwise stated, capitalized terms have the same meaning as given in the Registration Statement.
GENERAL
Comment
1: The Registration Statement is missing information and exhibits and contains bracketed disclosures. We may have additional comments
on such portions when you complete them in a pre-effective amendment, on disclosures made in response to this letter, on information
supplied supplementally, or on exhibits filed in any pre-effective amendment.
Response
1: The Trust acknowledges that the Registration Statement did not include certain information that was not yet known or finalized
as of the filing date. The Trust anticipates that the pre-effective amendment to the Registration Statement will provide the information
that was previously outstanding, to the extent it is still applicable.
Comment
2: Please advise us if you have submitted or expect to submit any exemptive applications or no-action requests in connection with
the Registration Statement.
Response
2: The Trust has not submitted any exemptive applications or no-action requests in connection with the Registration Statement. However,
the Trust and the Adviser may in the future apply for an exemptive order from the SEC to permit the Adviser and the Trust’s Board
of Trustees to hire, terminate and replace sub-advisers, and to amend the sub-advisory agreements between the Adviser and sub-advisers,
without obtaining shareholder approval. The Trust has added disclosure addressing this in the prospectus.
Comment
3: Please include the ticker symbols in EDGAR. Regulation S-T, Rule 313(b)(1).
Response
3: The ticker symbols will be added when, or prior to the time that, the pre-effective amendment to the Registration Statement is
filed.
Comment
4: Please provide a copy of the Index methodology for our review.
Response
4: The Index methodology was provided to the Staff by email on March 10, 2023.
Comment
5: Is a party other than the Fund’s sponsor or one of its affiliates providing the Fund’s initial (seed) capital? If
yes, please supplementally identify the party providing the seed capital and describe their relationship with the Fund.
Response
5: No party other than the Fund’s sponsor or one of its affiliates is providing the Fund’s initial (seed) capital.
Prospectus
Summary
Prospectus
Risk/Return
Summary: Fees and Expenses of the Fund
Comment
6. Please delete footnote 1 to the fee table, as the Distribution Plan has not been implemented. The details of the Distribution
Plan should instead be disclosed in response to Item 12 of Form N-1A.
Response
6: The footnote has been deleted in response to the comment.
Principal
Investment Strategies
Comment
7: The principal investment strategies disclosure describes the Fund’s investment strategies in relatively general terms. Please
explain in more detail the types of ETFs or other investments the Fund invests in to track the Index. Please also disclose the strategy
the Fund uses to track the Index (e.g. by using a replication or sampling strategy). Please provide this disclosure in summary
form in response to Item 4(a), and in additional detail in response to Item 9(b). See IM Guidance Update 2014-08, Guidance
Regarding Mutual Fund Enhanced Disclosure (“IM Guidance Update 2014-08”).
Response
7: The disclosure has been modified in response to the comment.
Comment
8: The Fund’s concentration policy is disclosed in response to Item 9(b). Please also summarize this disclosure in Item 4(a).
Additionally, please disclose here, and in Item 9: (i) whether the Index is currently concentrated and, if so, disclose the specific
industry or group of industries in which the Index is concentrated; and (ii) the Fund’s non-diversification status.
2
Response
8: Because the Fund will be classified as a diversified company, the disclosure in the prospectus and SAI regarding non-diversification
has been removed. The disclosure has also been revised to remove Concentration Risk as a principal risk of investing in the Fund. Further,
in response to the comment, Items 4(a) and 9(b) of Form N-1A require disclosure regarding any policy to concentrate in securities
of issuers in a particular industry or group of industries. The Trust submits that since the Fund, which will invest all or substantially
all of its assets in securities issued by other ETFs, will have a policy to not concentrate in securities of issuers in a particular
industry or group of industries (except to the extent that the Index concentrates in an industry or a group of industries), the disclosure
regarding its concentration policy is not required to be disclosed in the prospectus. Nevertheless, disclosure regarding the Fund’s
policy has been added in response to the comment.
Comment
9: Please provide additional detail here, and in response to Item 9(b), regarding the Index. In particular:
a. Please
provide additional detail regarding the selection criteria for Index components, explaining
how such components are included or excluded from the Index. In addition, please provide
additional detail regarding the proprietary Index methodology that is used to select the
ETF components.
b. Please
disclose the rebalancing and reconstitution process for the Index, including the frequency
thereof.
c. Please
disclose the name of the Index Provider, and whether the Index Provider is affiliated or
unaffiliated, in the summary principal investment strategies discussion.
Response
9: The disclosure has been modified in response to the comment.
Comment
10: Please disclose the types of cash equivalents the Fund intends to principally invest in. We note, for example, that the Fund
includes U.S. Government securities principal risk disclosure in response to Item 9; these securities should have corresponding principal
investment strategy disclosure. If these are not principal strategies of the Fund, please move the disclosure out of the summary prospectus.
Response
10: The disclosure has been modified to clarify that the Fund does not invest in cash equivalents as a principal investment strategy.
Principal
Risks
Comment
11: Please consider adding principal risk disclosure regarding the risks associated with a relatively-new investment adviser (e.g.,
the adviser may have limited experience managing registered investment companies; there may not be a long-term track record against which
an investor may judge the adviser; a new adviser may experience resource constraints).
Response
11: The disclosure in response to Item 9(c) has been enhanced in response to the comment.
3
Comment
12: Please tailor ETF Risk disclosure to the Fund’s intended investments. For example:
a) Please
clarify that the Fund’s ETF Risk disclosure is applicable both to the Fund and to the
underlying ETFs in which the Fund will invest.
b) Please
clarify whether any risks listed in this section (e.g., Cash Transactions Risk) are intended
to apply to the Fund, to the underlying ETFs in which the Fund will invest, or both.
c) Please
include any other applicable risks of investing in other investment companies.
Response
12: The disclosure has been modified to include, as a principal risk factor of the Fund, the risk of investing in other investment
companies. In addition, disclosure has been added to include a summary of investment risks of the ETFs in which the Fund may invest.
Comment
13: Please tailor Issuer Risk disclosure to the Fund’s intended investments in shares of ETFs.
Response
13: The disclosure has been modified in response to the comment. In particular, the Trust believes that the disclosure in the risk
factor entitled “Investments in Other Investment Companies and ETFs” sufficiently addresses the risk of investing in shares
of ETFs.
Comment
14: We note that this section includes Cash and Cash Equivalents Risk. Please consider also adding principal risk disclosure regarding
the Fund’s principal investments in money market funds and repurchase agreements, as disclosed in the principal investment strategies
section.
Response
14: The disclosure has been revised to clarify that the Fund will not hold cash or cash equivalents as a principal investment strategy.
Accordingly, principal risk disclosure has not been added in response to this comment.
Comment
15: Please confirm whether High Portfolio Turnover Risk is applicable to this passively-managed fund. If so, please add corresponding
principal strategy disclosure regarding frequent trading; otherwise, please delete. Please also reconcile this risk disclosure with Passive
Investment Risk.
Response
15: The disclosure has been revised to clarify that high portfolio turnover risk will not be a principal investment risk.
Comment
16: Disclosure in Authorized Participants Concentration Risk states that, to the extent authorized participants are unable to proceed
in creation and redemption transactions and no other authorized participants are able to step forward, “shares of the Fund may
be more likely to trade at a premium or discount to net asset value (“NAV”) and possibly face trading halts or delisting.”
Please also disclose that this could, in turn, lead to wider spreads between the bid and ask prices of Fund.
Response
16: The disclosure has been modified in response to the comment.
4
Comment
17: In Cash Transactions Risk, disclosure states that the Fund’s payment of redemptions in cash might cause the Fund to “pay
out higher capital gains distributions than ETFs that redeem in-kind.” Please additionally disclose that such redemptions could
also cause the Fund to incur brokerage costs it might not have incurred if it made redemptions in-kind. Finally, please also disclose
that these brokerage and capital gains costs could be imposed upon the Fund, and thus decrease the Fund’s NAV, to the extent that
such costs are not offset by a transaction fee payable by an authorized participant. Consistent with the disclosure of the same risk
in response to Item 9, please also revise the first sentence of this risk disclosure to make clear that the Fund effectuates purchases
and redemptions primarily for cash, rather than by in-kind delivery of portfolio securities.
Response
17: The disclosure has been revised to clarify that the Fund currently intends to effect creation and redemption transactions on
an in-kind basis.
Comment
18: In Premium/Discount Risk, please consider clarifying that intra-day deviation of the market price of the Fund’s shares
from NAV can be reflected in a spread between the bid and ask prices for Fund shares.
Response
18: The Trust believes that the existing disclosure is sufficient and has not revised the disclosure in response to this comment.
Comment
19: Please tailor Liquidity Risk disclosure to the Fund’s intended investments in shares of ETFs.
Response
19: The disclosure has been revised in response to the comment. Specifically, Liquidity Risk has been identified as a potential investment
risk of an ETF in which the Fund may invest rather than a direct risk of investing in the Fund itself.
Performance
Information
Comment
20: Please supplementally identify the broad-based securities market index expected to be used by the Fund in the average annual
total returns table.
Response
20: The Trust currently anticipates that the ICE U.S. 500 Index will be used as the broad-based securities market index in the average
annual total returns table. The Trust further notes that when the Fund has generated returns for at least one calendar year, the Fund
will identify the index in the prospectus as required pursuant to Item 4(b)(2) of Form N-1A.
Portfolio
Managers
Comment
21: Please revise the disclosure to state that the portfolio managers are “jointly and primarily responsible” for the
day-to-day management of the Fund.
Response
21: The Trust has revised the disclosure in response to the Staff’s comment.
Comment
22: Please provide the information required by Item 5(b) of Form N-1A.
Response
22: The disclosure has been modified to include disclosure about the Fund’s portfolio managers required by Item 5(b).
5
Statutory
Prospectus
Investment
Strategies
Comment
23: Form N-1A provides that the principal investment strategies and principal risks required by Item 4 in the summary prospectus
should be based on the information given in response to Item 9, and should be a summary of that information. Here, the Fund’s disclosure
in Item 9 is substantially identical to disclosure in the summary prospectus. Accordingly, please provide more fulsome disclosure regarding
the Fund’s principal investment strategies and risks as required by Items 9(b)(1)-(2) and Item 9(c). If the Fund’s position
is that it discloses everything about its principal investment strategies and risks in the summary prospectus, then the Fund has not
provided a summary or followed the layered disclosure regime adopted by the Commission. See IM Guidance Update 2014-08.
Response
23: The disclosure has been modified in response to the Staff’s comment.
Additional
Risk Information
Comment
24:
We
note that certain principal risks discussed in this section do not appear in the summary prospectus principal risk disclosures (e.g.,
Investments in Investment Companies Risk, Fixed Income Securities Risk, Foreign Investments Risk, U.S. Government Obligations Risk).
a) Please
add Investments in Investment Companies Risk to the summary prospectus, given the Fund’s
significant investments in ETFs.
b) Please
summarize in Item 4(b) all principal risks disclosed pursuant to Item 9(c) and include corresponding
principal strategy disclosure pursuant Items 4 and 9 if not already disclosed (e.g.,
fixed income securities, foreign securities).
c) If
some of the risks included in Item 9(c) disclosure are non-principal risks, please clarify
which risks in this subsection are principal risks and which are non-principal risks. Alternatively,
please move the non-principal risks to the SAI.
d) Please