“Custodians are typically allowed to terminate their contract with an ETF issuer after a notice period of about 90 days, depending on their agreement. Minus a custodian — a legal requirement under the Investment Company Act of 1940 — a fund’s board would be pushed to liquidate the ETF, with shareholders splitting the proceeds,” according to Bloomberg.
This is not the first time an ETF issuer has run into issues with a custodian on a marijuana ETF.
“At least three other issuers that contemplated starting pot ETFs ran into trouble lining up custodians, people familiar with the matters said. ETFMG bypassed those start-up issues by converting an existing fund,” reports Bloomberg.
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