What happens when an ETF I hold is delisted?
When an ETF is delisted, it means it can no longer be bought or sold. A fund company can delist an ETF for various reasons, such as a lack of investor interest and assets. When the fund closes, it is liquidated shortly after a specified date and investors receive their share of the proceeds from the liquidation.
When we become aware that an ETF held in your Wealthfront portfolio will be delisted, we’ll notify you ahead of time. We’ll continue to buy and sell the security consistent with your portfolio allocation until the security is no longer tradeable. This includes investing your deposits, processing withdrawals and rebalancing the account.
If you still hold an ETF after it has been delisted and the ETF has an alternate, we’ll automatically replace your allocation with the alternate ETF. You’ll receive your share of the cash proceeds after the fund liquidation and we’ll invest that cash into your portfolio, like a deposit. The new ETF may not be eligible for Tax-Loss Harvesting.
If the delisted ETF doesn’t have an alternate, we’ll hold your proceeds from the fund liquidation in cash until you adjust your allocation or add a new security to your portfolio. If you don’t make any changes after 90 days, we will invest the cash for you.
Note: When a security is liquidated as a result of being delisted, you may incur capital gains, which could be a taxable event.