SEC Adopts Amendments to Exemptive Application Procedures

Investment Management Update

Date: July 15, 2020

Key Notes:

  • The SEC’s recent amendments to Rule 0-5 under the Investment Company Act of 1940 enable applicants for exemptive relief to request an expedited review if an application is substantially identical to two other applications for which an order granting the requested relief has been issued within three years of the date of the application’s initial filing.
  • For other applications, (i.e., those not applying for expedited review), the SEC will take action on an application within 90 days of the initial filing and each of the first three amendments thereto, and within 60 days of any subsequent amendment.

On July 6, the SEC announced that it is adopting amendments to Rule 0-5 (Rule) under the Investment Company Act of 1940, as amended (1940 Act), to establish an expedited review procedure for exemptive and other applications that are substantially identical to recent precedent orders, as well as a new informal internal procedure for applications that would not qualify for the new expedited process. The amendments are intended to grant relief as efficiently and quickly as possible while also ensuring that applications continue to be carefully analyzed consistent with the relevant statutory standards. The new expedited review procedure will also make the application process less expensive and ensure that SEC staff can devote additional resources to the review of more novel exemptive order requests.

Expedited Review of Routine Applications

The newly adopted amendments to the Rule establish criteria that allow applicants to apply for expedited review of their applications. An applicant may request an expedited review if an application is substantially identical to two other applications for which an order granting the requested relief has been issued within three years of the date of the application’s initial filing. An application is substantially identical if it contains identical terms and conditions and differs only with respect to factual differences that are not material to the relief requested. Although the SEC considered excluding certain types of applications, it decided that it was unnecessary to adopt a broad exclusion after considering comments from industry participants.

Additional Information Required for Expedited Review

An applicant seeking expedited review will need to include the following information with their application:

  • “EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-5(d)” prominently displayed on the cover page of the application.
  • Exhibits with marked copies of the application showing changes from the final versions of the two precedent applications.
  • An accompanying cover letter, signed on behalf of the applicant by the person executing the application that
    • identifies the two substantially identical applications that serve as precedent and explains why the applicant chose those precedents;
    • if more recent applications of the same type have been approved, explains why the precedent applications chosen, rather than the more recent applications, are appropriate; and
    • certifies that the applicant believes the application meets the Rule’s requirements and that the marked copies are complete.
Expedited Review Timeline

Under the Rule, a notice for an application submitted for expedited review will be issued no later than 45 days from the filing date unless the applicant is notified that the application is not eligible for expedited review because it does not meet the Rule’s criteria or additional time is necessary for appropriate consideration. If an application is ineligible for expedited review, the SEC will allow the applicant to either withdraw the application or amend it so it can proceed outside the expedited review process. However, if an applicant submits an unsolicited amendment, the SEC will have an additional 30 days to review the amended application. Further, the 45-day period is paused if the SEC requests a modification to the application and will resume 14 days after filing an amendment that is responsive to the SEC’s request.

Procedure for Other Applications

For other applications (i.e., those not seeking expedited review), the SEC will take action on an application within 90 days of the initial filing and each of the first three amendments thereto, and within 60 days of any subsequent amendment. An action is defined as issuing a notice of application, providing the applicant with comments or informing the applicant that the application will be forwarded to the Commission, in which case it is no longer subject to paragraph (a) of the Rule. In addition, the SEC may grant 60-day extensions, and an applicant will be notified of any such extension.

Applications Deemed Withdrawn Under the Standard Review Process

Under the Rule, an application will be deemed withdrawn if the applicant has not responded in writing to a request for clarification or modification within 120 days after the request. Applicants do need not to take any affirmative action to cause withdrawal; applications will be withdrawn by operation of law.

FOR MORE INFORMATION

For more information, please contact:

Andrew J. Davalla
614.469.3353
Andrew.Davalla@ThompsonHine.com

Brian Doyle-Wenger
614.469.3294
Brian.Doyle-Wenger@ThompsonHine.com

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