"Active ETFs are going to come out no matter what—that's already in the cards," said Ian Naismith, a partner at Sarasota Capital Strategies. "The real thorn in the SEC's side is going to be how much more difficult those types of products will make it to determine accurate prices."

With index ETFs, holdings are generally held for at least a month. That's due to the fact that they follow preset rules which rebalance portfolios on monthly, quarterly, semiannual or annual bases. "A lot of ETFs don't even change at all unless there's a change in the underlying index," said Naismith. "If a new company comes in or merges, then they'll make a switch."

Quantitative-based ETFs are slightly different than market-cap weighted. "Although they can rebalance much more often, quant-based portfolios are rule-based, making them fairly easy to price every 15 seconds," Naismith said. "But the key is that their portfolios can't change at any time like a truly active ETF."

The wave of active ETFs coming to market will act simply like mutual funds that trade intraday, he added. "The problem we're seeing as managers of client portfolios is in trying to get the absolute best pricing," said Naismith. "When you have a market maker out there with an ETF that's bid/ask price is greater than its intrinsic value, then you're going to find a lot more people paying more for ETFs than they should."

Potential Market Gouging

And that's where real gouging can take place in the market. Naismith fears that many of the worst offenders among mutual fund companies and financial services providers will become more involved when active ETFs become popular.

"They're already seeing movement away from their high-priced mutual funds to ETFs," said Naismith. "It only makes sense that they put out versions of their existing active mutual funds in ETF structures."

That's likely to drive up prices, both in terms of expense ratios charged to investors as well as more problems with fair pricing. "I don't know if they'd make their own markets in ETFs, but there's already regular pricing problems with some existing ETFs," Naismith said. "Unless there's some mandate from the SEC, coming up with fair pricing in ETFs is going to become like the Wild West."

High-volume ETFs such as SPY and iShares Russell 2000 Index (NYSE: IWM) and PowerShares QQQ (NASDAQ: QQQQ) don't pose the real problem, he added. "A lot of the thinly traded ETFs are where fair pricing becomes a big headache," Naismith said. "But it's not all of them, just certain ones."

He added: "With active ETFs that are lightly traded, investors are facing a real dilemma. Right now, we're seeing on a regular basis gaps of 30-40 basis points between bids and actual prices. Once active ETFs start storming the market, there's got to be some sort of fair-pricing mechanism to give diligent advisors and investors a way to see what the correct values are at any given moment."

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