Wednesday, July 08. 2020
The SEC regularly receives applications seeking orders for exemptions or other relief for funds under the Investment Company Act. Many funds have historically required an exemption in order to operate, such as exchange-traded funds. Other funds have sought exemptive relief in order to operate in a more efficient and less costly manner. Rule 0-5 under the Act establishes the procedure for applications seeking such exemptive orders. Granting appropriate exemptions from the Act can provide important economic benefits to funds and their shareholders, as well as fostering financial innovation and increasing the diversity of opportunities for investors.
The amendments to rule 0-5 to, among other things, establishes an expedited review procedure for certain applications as well as an internal timeframe for review of applications outside of the expedited procedure. The amendments are intended to grant relief as efficiently and quickly as possible while also ensuring that applications continue to be analyzed carefully, which is consistent with the relevant statutory standards. A more efficient application process will allow applicants to realize the advantages of relief more quickly than otherwise would be the case. Fund shareholders should generally share in these benefits. In addition, the new expedited review procedure will make the applications process less expensive for applicants. It will also allow SEC staff to devote additional resources to the review of more novel requests.
The new amendments focus on the following:
Expedited Review Procedure for Routine Applications
The amendments to rule 0-5 under the Investment Company Act establish an expedited review procedure for routine applications that are substantially identical to recent precedent.
- Expedited review will be available if the application is substantially identical to two other applications for which an order granting the relief has been issued within three years of the date of the application’s initial filing.
- Notice for an application filed under expedited review will be issued no later than 45 days from the date of filing unless the application is not eligible under the rules or additional time is necessary in order for SEC staff to complete appropriate consideration.
- An application for expedited review will be deemed withdrawn if the applicant does not respond to comments from SEC staff within 30 days.
Procedure for Other Applications
The amendments to rule 0-5 under the Act will also deem an application outside of expedited review withdrawn when the applicant does not respond to comments from SEC staff within 120 days. In addition, new rule 17 CFR 202.13 establishes an internal timeframe for staff to take action on applications outside of expedited review within 90 days of the initial filing and each of the first three amendments thereto and within 60 days of any subsequent amendment.
These new rule changes will become effective 270 days after their publication in the Federal Register.