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SEC Releases Exemptive Application Process Audit

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  • Baker, John
    The SEC s Office of Inspector General has completed and released an audit of the exemptive application process in the Division of Investment Management s
    Message 1 of 1 , Oct 4, 2006
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      The SEC's Office of Inspector General has completed and released
      an audit of the exemptive application process in the Division of
      Investment Management's Office of Investment Company Regulation. Audit
      No. 408 (Sept. 29, 2006). OICR processes investment company
      applications for exemptions from the Investment Company Act of 1940, as
      well as applications for investment company deregistrations. The audit
      found that the timeliness of the process can be improved: Of 83
      non-draft exemptive applications received in fiscal year 2005, only 13
      (approximately 16%) received initial comments within the SEC's 45-day
      timeliness goal. The Office of Inspector General made a number of
      recommendations, including the following:

      * The Division of Investment Management should set and monitor a
      deadline for submitting the proposed multimanager exemptive rule to the
      Commission for consideration. (However, the SEC has recently noticed
      several proposed multimanager exemptive orders, implying that the
      Division may not expect the rule to be adopted in the immediate future.)
      * The Division is in the process of updating its policies and
      guidelines for the review of exemptive applications. These guidelines
      should clarify the Division's requirement that applicants justify their
      "extraordinary circumstances" when submitting draft applications.
      * The Division should develop policies and procedures to identify
      "clearly deficient" applications and to return them to the applicant
      without a detailed review.
      * Applicants for deregistration often do not file Form N-SAR, and
      OICR does not monitor whether it is filed. The Division should
      determine whether the requirement for funds applying for deregistration
      to file Form N-SAR should be revised or eliminated. If so, the Division
      should submit the appropriate recommendation to the Commission. If not,
      OICR should enforce the requirement.
      * The Division should submit a recommendation to the Commission to
      eliminate the requirement that applicants submit proposed Federal
      Register notices with their exemptive applications.
      * OICR should develop, track, and report outcome goals for its
      exemptive application process and timeliness goals for its novel
      exemptive applications.

      The audit is available online at


      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1220 19th Street NW, Suite 600
      Washington DC 20036
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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