FM Opportunistic Equity ETF draft treats a stock contribution as tax-deferred

Northern Lights Fund Trust IV filed Tuesday to register FM Opportunistic Equity ETF, a stock fund that First Manhattan Co. LLC would advise. The prospectus is incomplete and may be changed. It says the fund's opening portfolio was acquired from investors who contributed securities, in a transaction meant to defer tax on the gains. It also says the fund has not yet begun operating.

The trust, not the adviser, is the company that registers the shares. An adviser's ETF in this setup is a series of someone else's trust: the trust is the legal issuer, and the adviser is hired to run the portfolio. Northern Lights, in Cincinnati, already issues First Manhattan's two listed ETFs. Shares of the new one may not be sold until the registration is effective. The trust checked the box for that to happen 75 days after the Nov. 10 filing, on Jan. 24, 2027. A public offering would follow as soon as practical after that. The prospectus is still dated a blank day in 2027.

What the filing says already happened

Section 351 of the U.S. tax code can let an investor contribute appreciated securities to a corporation and defer the tax. The contributor's old cost basis carries into the new shares, and the fund takes that same basis. The filing describes the new fund's opening portfolio that way: acquired from investors in securities rather than cash, and intended to qualify.

Outside counsel, it says, issued an opinion shortly after the contribution that the transfer qualifies, based on representations from each contributor and the fund. No ruling from the Internal Revenue Service has been sought, or will be sought. The treatment is not assured. If it fails, the contributor would owe tax on the gain in the year of the contribution.

Other pages do not agree on whether the fund has started. One says the fund has not yet begun operating and has produced no financial statements. A performance section says investment operations have only recently begun, and that the portfolio manager has served since a start date still left blank. The document does not reconcile those statements, and it does not name the investors.

The September ruling

On Sept. 28, the U.S. Treasury Department and the IRS issued Revenue Ruling 2026-20 and Notice 2026-62. The ruling treats as a taxable exchange a plan in which an investor contributes appreciated securities to a new ETF and, as part of that same plan, the fund uses those securities to redeem shares held by an authorized participant, a firm allowed to create and redeem ETF shares directly with the fund, usually in large blocks. An ordinary buyer on an exchange is not one.

The notice calls that pattern a Section 351 conversion transaction. It says it does not address, and takes no view on, seeding a new ETF with securities that fit the fund's strategy and that the fund intends to keep, absent a substantial change in circumstances.

Counsel has opined, the filing says, that this contribution and the portfolio management after launch are materially different from the ruling and are not that conversion transaction. The adviser expects the contributed securities to fit the objective. A contributor should not count on the fund keeping any particular stock. The fund, its board, the adviser and the firm hired to trade the portfolio make no representation about future holdings.

The filing says that lower basis could lead this fund to recognize more taxable gain on a later sale than if it had bought the same stocks in the market. First Manhattan's brochure of Aug. 13, 2026 says a contribution of that kind could reduce after-tax returns for the people who contributed the securities and for other investors in the fund. The brochure is describing the firm's two existing ETFs. Their initial raises, it says, included some in-kind contributions of securities from advisory clients invested in a similar strategy. Tuesday's filing, for the new fund, says only "investors." It does not say they are clients, and it does not say holders of the two ETFs already trading would be asked to move.

The fund, and a fee left blank

The fund would seek long-term capital appreciation by holding the common stocks of about 25 to 35 companies, a count still printed in square brackets, the draft's mark for something not yet filled in. Those could include foreign companies. The adviser would look for businesses it views as high quality but temporarily out of favor. Under normal circumstances, at least 80% of total assets would be in equities, and the fund would be actively managed.

Himayani Puri is the named portfolio manager. She is a partner and head of research at FMC Group Holdings, the adviser's parent, and the filing says she has nearly three decades as a value investor. Vident Advisory, LLC, which does business as Vident Asset Management, would handle the trading. The adviser, not the fund, would pay Vident.

The proposed ticker, FMOE, is in brackets too. The draft names NYSE Arca as the exchange.

The draft also disagrees with itself on what a shareholder would be allowed to see. It calls the structure non-transparent, which can mean a wider gap between the share price and the value of the holdings. A holdings policy in the same document says the fund would publish, at the start of each business day, the securities used to calculate that day's net asset value. One passage still uses a placeholder web address, and a mailing address in the section still names First Manhattan's FM Focus Equity ETF, FMCX. The draft states both descriptions and does not choose between them.

Shareholders would pay the advisory fee, which the fee table leaves blank. First Manhattan has agreed to pay the fund's other expenses, except a stated list that includes brokerage, taxes, borrowing costs, fees of other funds it holds, and extraordinary expenses. A distribution and service fee, the charge known as a 12b-1 fee, is marked none. The board has approved a plan that could later add a charge of up to 0.25% of average daily net assets, separate from the advisory fee. The draft says there are no current plans to impose it.

FMCX charges 0.72%. Its issuer page listed $117.8 million in net assets on Nov. 10. First Manhattan's FM Compounders Equity ETF, FMCE, charges 0.71%, and its page listed $70 million the same day. Tuesday's filing does not change either fund's fee or strategy.