These proposed amendments are in response to the regular applications the SEC receives under the Investment Company Act seeking orders for exemptions or other relief. Many funds, such as exchange-traded funds, have historically required an exemption in order to operate. Other funds have sought exemptive relief to operate in a more efficient, less costly manner. When granted by the SEC, these exemptions can provide important economic benefits to funds and their shareholders, foster financial innovation, and increase the diversity of investment opportunities.

The proposed amendments, which apply to rule 0-5 of the Investment Company Act, should allow the staff to grant relief as efficiently and quickly as possible while ensuring that applications continue to be carefully analyzed consistent with the relevant standards. This expedited process will permit applicants to experience the benefits of exemption more quickly, which should in turn translate into benefits for fund shareholders. Additionally, the process would become less expensive for applicants. There are also advantages to the SEC in this new process such that staff would have more time to devote to the review of more novel requests.

Specifically, the proposed amendments to rule 0-5 under the Investment Company Act and other rule changes would:

• Create an expedited review procedure for routine applications that are nearly identical to recent precedent. This expedited review would be available if the application is substantially identical to two other applications for which an order granting the requested relief has been issued within the two years of the date of the application’s initial filing. Notice for an application filed under expedited review would be issued no later than 45 days from the date of the filing unless applicants are not qualified under the rules or if the staff believes comments are necessary.


• Deem an application outside of the expedited review withdrawn when the applicant does not respond to comments from SEC staff within 120 days.


• Create new rule 17 CFR 202.13, which would establish an internal timeframe for SEC staff to take action on applications outside of the expedited review process within 90 days of the initial filing and amendments thereto.


• Make plans for the staff of the Division of Investment Management section to publicly disseminate comments on applications, as well as the responses to these comments, no later than 120 days after the final disposition of an application. This is similar to the Division of Investment Management Disclosure Office’s current policy in reviewing registration statement filings.

The SEC seeks public comment on the these proposed changes. The public comment period will be open for 30 days after publication in the Federal Register. The proposed rule changes can be read here. You can submit comments using the form available on the SEC’s website or by e-mailing rule-comments@sec.gov with the reference number (S7-19-19) in the subject line. You can also use the Federal Rulemaking Portal to submit comments or send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, please remember to include reference number S7-19-19.

Sources:

SEC Proposes Amendments to Exemptive Applications Procedures (www.sec.gov)
Amendments to Procedures With Respect to Applications Under the Investment Company Act of 1940 (www.sec.gov)