The Franklin Responsibly Sourced Gold ETF, listed on the NYSE Arca under the symbol “FGDL,” is a fund that aims to reflect the performance of the price of gold bullion, minus the expenses of the fund. Although the fund is considered a relatively safe investment vehicle, it is not immune to risks and uncertainties that can adversely affect its performance. Market disruption events and extraordinary events can negatively impact the fund’s operations, trading of its shares, and the value of investments in the shares.
Market Disruption Events
A market disruption event is defined as an unexpected event that disrupts the normal functioning of the fund. Examples of such events include disruptions in the trading of gold, delays or disruptions in the publication of the LBMA Gold Price, and other unforeseen circumstances. These events can result in disruptions or changes in the calculation of the LBMA Gold Price, suspension or cancellation of creation and redemption transactions, and disruptions or halts in secondary market trading. Moreover, market disruption events can cause the trading of the shares to become more volatile, leading to wider discounts or premiums to the net asset value.
Extraordinary Events
Extraordinary events, on the other hand, are incidents that have a larger impact on the fund’s operations. These events can lead to market disruptions, trading halts, or even the termination of the fund. Instances of extraordinary events could include natural disasters, fire, war, terrorism, riots, rebellions, computer viruses, power or mechanical failures, communications disruptions, work stoppages, and events beyond the control of the fund or its counterparties.
The systems and applications that the fund relies on may not always operate as intended, which increases the risk of exposure to unforeseen circumstances and operational failures. These risks cannot be entirely mitigated or prevented, and further efforts or expenditures may not necessarily be cost-effective.
The service providers engaged by the fund may not carry adequate insurance to cover claims against them, which could adversely affect the value of the fund’s net assets. Furthermore, the administration of indemnification of certain service providers could negatively impact investments in the shares.
Conflicts of interest may also arise among the sponsor, its affiliates, the fund, and its shareholders, which could lead to favoring the interests of the former over the latter. Additionally, the loss of intellectual property rights related to the fund or competing claims over ownership of those rights can adversely affect the fund and the investment in its shares.
Investors in the Franklin Responsibly Sourced Gold ETF should be aware of these potential risks and uncertainties that can affect the fund’s performance and the value of their investments. Although the fund aims to provide a relatively safe investment option, it is crucial to acknowledge that it is not completely immune to market disruption events and extraordinary circumstances that can negatively impact its operations and share value.
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