C Citigroup Inc

WASHINGTON—U.S. market regulators are conducting a sweeping review of exchange-traded funds, weighing the possibility of new rules aimed at trying to contain trading and pricing disruptions that can harm investors.

The Securities and Exchange Commission is examining the full life cycle of ETFs, from the role that Wall Street market-makers play in creating and selling shares to the sales practices of brokers who sell the funds, SEC Chairman Mary Jo White said in remarks prepared for a conference in Washington.

"Despite the popularity and broad success of these funds, their history is not without some turbulence," Ms. White said in a speech to be delivered Friday to the Investment Company Institute. "Further regulatory steps beyond additional disclosures may be needed to address some of these issues."

ETFs have flourished over the past decade as the variety of fund strategies proliferated and their assets increased fivefold to $2.1 trillion. But extreme trading gyrations that occurred last August, when severe price swings led to trading halts in more than 300 ETFs, have spurred the SEC to examine "these events and any broader implications they may have for how we regulate ETFs," Ms. White said.

Ms. White said the agency is specifically analyzing the role that large Wall Street dealers play in keeping the price of ETF shares in line with their underlying portfolios of stocks or bonds. That arbitrage activity is critical for making sure investors don't buy or sell ETF shares at prices that are out of whack with the fair value of the fund's assets.

The tight relationship between ETF prices and the funds' net-asset values broke down on Aug. 24, 2015, when dozens of them traded at a sharp discount to the sum of their holdings. In a paper published in February, SEC economists blamed the volatility on a perfect storm of heightened trading volume and a withdrawal of liquidity by market makers.

Ms. White also said Friday that the SEC is reviewing ways to improve the "form, content and delivery" of mutual fund disclosures. The agency is considering, for instance, steps that would make it easier for investors to understand how fees eat into their returns, she said.

"A fund's disclosure of fees and expenses plays a pivotal role in informing investors about their fund investments," Ms. White said.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

May 20, 2016 08:35 ET (12:35 GMT)

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