[Federal Register Volume 85, Number 179 (Tuesday, September 15, 2020)]
[Rules and Regulations]
[Pages 57089-57108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14884]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 202 and 270

[Release No. IC-33921; File No. S7-19-19]
RIN 3235-AM51


Amendments to Procedures With Respect to Applications Under the 
Investment Company Act of 1940

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (the ``Commission'') is 
adopting amendments to its rules under the Investment Company Act of 
1940 to establish an expedited review procedure for applications that 
are substantially identical to recent precedent as well as a rule to 
establish an internal timeframe for review of applications outside of 
such expedited procedure. In addition, the Commission is adopting an 
amendment to its rules under the Investment Company Act of 1940 to deem 
an application outside of expedited review withdrawn when the applicant 
does not respond in writing to comments within 120 days.

DATES: Effective date: June 14, 2021.

FOR FURTHER INFORMATION CONTACT: Steven Amchan and Hae-Sung Lee, Senior 
Counsels; Daniele Marchesani, Assistant Chief Counsel; Chief Counsel's 
Office, at (202) 551-6825; or Keith Carpenter, Senior Special Counsel; 
Disclosure Review and Accounting Office, at (202) 551-6921, Division of 
Investment Management, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting an amendment to 17 CFR 270.05 (rule 0-5) 
under the Investment Company Act of 1940 [15 U.S.C. 80a et seq.], an 
amendment to 17 CFR 200.30-5 (rule 30-5) and 17 CFR 202.13. The 
Commission is also adopting related amendments to rule 30-5 of its 
Rules of Organization and Program Management governing delegation of 
authority to the Director of Division of Investment Management.

Table of Contents

I. Introduction and Background
    A. Overview of Applications for Relief Under the Act
    B. Efforts To Improve the Application Process
    C. Factors Affecting the Application Process
II. Discussion of Commission Action
    A. Expedited Review Procedure
    1. Eligibility for Expedited Review
    2. Additional Information Required for Expedited Review
    3. Expedited Review Timeframe
    B. Timeframe for ``Standard Review'' of Applications
    C. Applications Deemed Withdrawn Under the Standard Review 
Process
    D. Release of Comments on Applications and Responses
    E. Other Matters
III. Economic Analysis
    A. Introduction
    B. Economic Baseline
    1. Applications for Relief
    2. Review Process
    C. Benefits and Costs of the Amendment to Rule 0-5
    1. Benefits
    2. Costs
    D. Effects on Efficiency, Competition, and Capital Formation
    E. Reasonable Alternatives
    1. Different Precedent or Timeframe Requirements
IV. Paperwork Reduction Act
    A. Burden of Information Collection

[[Page 57090]]

    B. Cost to Respondents
V. Final Regulatory Flexibility Analysis
    A. Reasons for and Objectives of the Actions
    B. Legal Basis
    C. Small Entities Subject to the Amendment
    D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    E. Duplicative, Overlapping or Conflicting Federal Rules
    F. Significant Alternatives
VI. Statutory Authority

I. Introduction and Background

    The applications process under the Investment Company Act of 1940 
(``Act'') has been a significant and valuable tool in the evolution of 
the investment management industry, and the rules we are adopting are 
intended to increase its efficiency and transparency. The Commission is 
adopting amendments to rule 0-5 under the Act to establish an expedited 
review procedure for applications that are substantially identical to 
recent precedent as well as a rule to establish an internal timeframe 
for review of applications outside of such expedited procedure. The 
Commission is also adopting amendments to rule 0-5 to deem an 
application outside of expedited review withdrawn when the applicant 
does not respond in writing to comments within 120 days.\1\
---------------------------------------------------------------------------

    \1\ Unless otherwise specified, references to days herein are to 
calendar days.
---------------------------------------------------------------------------

    On October 18, 2019, we proposed these rule amendments and new 
rule.\2\ We also announced our intention to begin disseminating 
publicly staff of the Division of Investment Management (``Staff'' or 
``Division'') comments on applications as well as responses to those 
comments. As discussed in greater detail below, commenters \3\ 
generally supported the rules to make the applications process more 
efficient and transparent.\4\ Some commenters were supportive of our 
proposal without suggesting modifications.\5\ Other commenters 
recommended modifications and clarifications to certain aspects of it. 
For example, several commenters suggested broadening the eligibility 
requirements to use the expedited review process.\6\ Additionally, a 
number of commenters recommended making the proposed internal timeframe 
for standard applications shorter.\7\ Finally, while a few commenters 
supported our proposal to begin publicly releasing Staff comments and 
applicants' responses,\8\ several did not and expressed concerns.\9\
---------------------------------------------------------------------------

    \2\ See Amendments to Procedures With Respect to Applications 
under the Investment Company Act of 1940, Investment Company Act 
Release No. 33658 (Oct. 18, 2019) [84 FR 58075 (Oct. 30, 2019)] 
(``Proposing Release'').
    \3\ The comment letters on the Proposing Release (File No. S7-
19-19) are available at https://www.sec.gov/comments/s7-19-19/s71919.htm.
    \4\ See Comment Letter of the Investment Company Institute (Nov. 
29, 2019) (``ICI Comment Letter''); Comment Letter of the Investment 
Adviser Association (Nov. 27, 2019) (the Investment Adviser 
Association stated that it supports the comments and recommendations 
put forth in the ICI Comment Letter); Comment Letter of the Asset 
Management Group of the Securities Industry and Financial Markets 
Association (Nov. 27, 2019) (``SIFMA AMG Comment Letter''); Comment 
Letter of Fidelity Investments (Nov. 29, 2019) (``Fidelity Comment 
Letter''); Comment Letter of Stradley Ronon Stevens & Young, LLP 
(Dec. 4, 2019) (``Stradley Comment Letter''); Comment Letter of the 
Small Business Investor Alliance (Nov. 29, 2019) (``SBIA Comment 
Letter''); Comment Letter of Kathleen Crowley (Nov. 6, 2019) 
(``Kathleen Crowley Comment Letter''). One commenter questioned why 
the changes we are adopting require a rule. See Comment Letter of 
Diane Smith (Oct. 20, 2019) (``Diane Smith Comment Letter''). The 
commenter asked why the Staff cannot just quickly notice 
applications that are substantially identical to precedent. Id. We 
are enacting these procedures as rules because we believe that 
applicants will benefit from the certainty and transparency of these 
rules.
    \5\ See SBIA Comment Letter; Kathleen Crowley Comment Letter.
    \6\ See ICI Comment Letter; SIFMA AMG Comment Letter; Fidelity 
Comment Letter; Comment Letter of the American Investment Council 
(Nov. 26, 2019) (``AIC Comment Letter''); Stradley Comment Letter.
    \7\ See id.
    \8\ See Diane Smith Comment Letter; Comment Letter of the 
Capital Group Companies (Nov. 26, 2019) (``Capital Group Comment 
Letter''); Comment Letter of Abigail Najera (Nov. 14, 2019) 
(``Abigail Najera Comment Letter''); Comment Letter of Ed Snoke 
(Dec. 21, 2019) (``Ed Snoke Comment Letter'').
    \9\ See ICI Comment Letter; SIFMA AMG Comment Letter; Fidelity 
Comment Letter; Stradley Comment Letter.
---------------------------------------------------------------------------

    After consideration of the comments we received, we are adopting 
the rule amendments and rule largely as proposed, with modifications to 
address comments.\10\ Additionally, at the present time Staff comments 
and applicants' responses will not be publicly disseminated.
---------------------------------------------------------------------------

    \10\ A few commenters had suggestions for improving the 
applications notice process. See Diane Smith Comment Letter; Ed 
Snoke Comment Letter. While changing the application notice process 
is beyond the scope of this rulemaking, the Staff will consider the 
suggestions as they continue to consider process improvements and 
any additional recommendations to the Commission.
---------------------------------------------------------------------------

A. Overview of Applications for Relief Under the Act

    In 1940, Congress passed the Act in response to numerous abuses 
that existed in the investment company industry prior to that time.\11\ 
As a result, the Act imposes significant substantive restrictions on 
the operation of investment companies that it regulates (``funds''). 
Congress, however, also recognized the need for flexibility to address 
unforeseen or changed circumstances, consistent with the protection of 
investors, in the administration of the Act.\12\
---------------------------------------------------------------------------

    \11\ See generally Investment Trusts and Investment Companies, 
Report of the Securities and Exchange Commission, pt. 3, ch. 7, H.R. 
Doc. No. 136, 77th Cong., 1st Sess. (1941); 15 U.S.C. 80a-1.
    \12\ See e.g., Investment Trusts and Investment Companies: 
Hearings on S. 3580 Before a Subcomm. of the Senate Comm. on Banking 
and Currency, 76th Cong., 3d Sess. 872 (1940) (hereinafter 1940 
Senate Hearings) (Commissioner Healy stated that ``it seemed 
possible and even quite probable that there might be companies--
which none of us have been able to think of--that ought to be 
exempted.''); id. at 197 (David Schenker, Chief Counsel of the 
Investment Trust Study, stated that ``the difficulty of making 
provision for regulating an industry which has so many variants and 
so many different types of activities . . . is precisely [the reason 
that section 6(c)] is inserted.'').
---------------------------------------------------------------------------

    The Act, therefore, contains provisions that empower the Commission 
to issue orders granting exemptions from provisions of the Act, 
authorizing transactions, or providing other relief.\13\ Most 
significantly, section 6(c) gives the Commission the broad power to 
exempt conditionally or unconditionally any person, security, or 
transaction from any provisions of the Act or any rule thereunder, 
provided that the exemption is ``necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of [the Act].'' 
\14\ The Commission regularly receives applications seeking orders for 
exemptions or other relief under the Act.\15\ If the request meets the 
applicable standards, the Commission publishes a notice of the 
application in the Federal Register and on its public website, stating 
its intent to grant the requested relief.\16\ The notice gives 
interested persons an opportunity to request a hearing on the 
application. If the Commission does not receive a hearing request 
during the notice

[[Page 57091]]

period, and does not otherwise order a hearing on an application, 
subsequent to the expiration of the notice period, the Commission 
generally issues an order granting the requested relief.\17\
---------------------------------------------------------------------------

    \13\ As the orders are subject to the terms and conditions set 
forth in the applications requesting relief, references in this 
release to ``relief'' or ``orders'' include the terms and conditions 
described in the related application.
    \14\ 15 U.S.C. 80a-6(c). Other sections of the Act provide the 
Commission with additional or specific exemptive authority. See, 
e.g., section 3(b)(2) (Commission may find that an issuer is 
``primarily engaged'' in a non-investment company business even 
though the issuer may technically meet the definition of investment 
company); section 12(d)(1)(J) (Commission may exempt any person, 
security, or transaction, or any class or classes of transactions, 
from section 12(d)(1) if the exemption is consistent with the public 
interest and the protection of investors); and section 17(b) 
(Commission may exempt proposed transactions from the Act's 
affiliated transaction prohibitions) (codified at 15 U.S.C. 80a-
3(b)(2), 15 U.S.C. 80a-(12)(d)(1)(J), and 15 U.S.C. 80a-17(b)).
    \15\ In fiscal year 2019, approximately 112 initial applications 
were filed under the Act on EDGAR Form Type 40-APP.
    \16\ Notices of the Commission's intent to deny the requested 
relief, and the related orders, are rare because applicants 
typically withdraw or abandon their application in anticipation of 
such actions.
    \17\ 15 U.S.C. 80a-39; 17 CFR 270.0-5. In fiscal year 2019, the 
Commission issued 97 orders for applications under the Act.
---------------------------------------------------------------------------

    The Staff reviews the applications that the Commission receives 
under the Act.\18\ During the review process, the Division may issue 
comments to the applicant, asking for clarification of, or modification 
to, an application to determine whether, or ensure that, the relief 
meets the Act's standards.\19\ In addition, the Commission has granted 
the Director of the Division of Investment Management (``Director'') 
delegated authority to issue notices of applications and orders 
generally where the matter does not appear to the Director to present 
significant issues that have not been previously settled by the 
Commission or to raise questions of fact or policy indicating that the 
public interest or the interest of investors warrants that the 
Commission consider the matter.\20\ The vast majority of notices of 
applications and orders are issued by the Commission via the Staff 
under delegated authority. For those applications for which the 
Director does not have delegated authority, after the Division's review 
is completed, the Division presents them to the Commission. The 
Director does not have delegated authority to deny applications.
---------------------------------------------------------------------------

    \18\ Applications under the Act are filed on EDGAR. See 
Mandatory Electronic Submission of Applications for Orders under the 
Investment Company Act and Filings Made Pursuant to Regulation E, 
Investment Company Act Release No. 28476 (Oct. 29, 2008). The 
Commission has stated that the Staff will not, except in the most 
extraordinary situations, review draft applications. See Commission 
Policy and Guidelines for Filing of Applications for Exemption, 
Investment Company Act Release No. 14492 (Apr. 30, 1985) (specifying 
certain procedures that applicants should follow in order to 
facilitate the review of applications) (``1985 Release''). 
Consistent with the Commission's statement, the Staff currently only 
reviews draft applications in very limited circumstances. One 
commenter stated that the Staff has not provided a clear explanation 
of how it evaluates whether an application meets this high standard, 
and requested that we more clearly define it, and establish a formal 
process for applicants to seek review of draft applications. See AIC 
Comment Letter. The Commission's longstanding policies regarding 
draft applications from the 1985 Release are well established and we 
do not believe they require further elaboration. Applicants seeking 
clarifications as to their particular facts and circumstances are 
encouraged to reach out to the Staff.
    \19\ In the past, the Staff placed applications on inactive 
status when applicants did not respond to comments within 60 days. 
Such inactive status was for internal tracking purposes only and had 
no effects on the application process. In the expedited review 
process we are adopting, 17 CFR 270.0-5(f)(2)(iii) (rule 0-
5(f)(2)(iii)) deems expedited applications withdrawn without 
prejudice if the applicant has not filed an amendment responsive to 
a Staff request for modification within 30 days. For non-expedited 
applications, new 17 CFR 270.0-5(g) (rule 0-5(g)) provides that if 
an applicant has not responded in writing to a request for 
clarification or modification of an application within 120 days, 
such application will be deemed withdrawn without prejudice.
    \20\ Title 17 CFR 200.30-5(a)(1) generally delegates the power 
to issue notices with respect to applications under the Act where 
the matter does not appear to the Director to present significant 
issues that have not been previously settled by the Commission or to 
raise questions of fact or policy indicating that the public 
interest or the interest of investors warrants that the Commission 
consider the matter. Title 17 CFR 200.30-5(a)(2) generally delegates 
the power to authorize the issuance of orders where (1) a notice has 
been issued and no request for a hearing has been received from any 
interested person within the period specified in the notice, (2) the 
Director believes that the matter presents no significant issues 
that have not been previously settled by the Commission, and (3) it 
does not appear to the Director to be necessary in the public 
interest or the interest of investors that the Commission consider 
the matter.
---------------------------------------------------------------------------

    The applications process under the Act has been a significant and 
valuable tool in the evolution of the investment management industry, 
and sometimes is the origin of new rules under the Act.\21\ Some 
applications, for example, have requested relief from provisions of the 
Act to permit funds to operate in a more efficient and less costly 
manner.\22\ Applicants have also sought relief to implement innovative 
features or create new types of funds that do not fit within the 
regulatory confines of the Act.\23\ For example, over the course of 27 
years, exchange-traded funds (``ETFs'') originated and developed 
through the applications process.\24\ Because the drafters of the Act 
in 1940 did not contemplate the ETF structure, ETFs need exemptions 
from certain provisions of the Act to operate.\25\ ETFs registered 
under the Act now have approximately $3.32 trillion in total net assets 
and account for approximately 16 percent of total net assets of 
registered investment companies.\26\
---------------------------------------------------------------------------

    \21\ See infra footnote 35.
    \22\ See, e.g., Franklin Alternative Strategies Funds, et al., 
Investment Company Act Release Nos. 33095 (May 10, 2018) (Notice of 
Application) and 33117 (June 5, 2018) (Order) (permitting applicants 
to operate a joint lending and borrowing facility).
    \23\ For example, money market funds need exemptive relief from 
section 2(a)(41) (which requires registered investment companies to 
value their securities based on market values, if available, or if 
not, as determined in good faith by the board of directors) in order 
to operate. In a series of orders beginning in the 1970s, the 
Commission permitted money market funds to use alternative valuation 
methods, such as amortized cost or penny rounding. The Commission 
later adopted 17 CFR 270.2a-7 (rule 2a-7 under the Act) to allow 
money market funds to operate without individual exemptive orders.
    \24\ See Exchange-Traded Funds, Investment Company Act Release 
No. 33646 (Sept. 25, 2019).
    \25\ In 2019, the Commission adopted 17 CFR 270.6c-11 (rule 6c-
11) providing relief to most ETFs under the Act. See id.
    \26\ See id. at 5.
---------------------------------------------------------------------------

B. Efforts To Improve the Application Process

    As discussed in the previous section, granting appropriate 
exemptions from the Act can provide important economic benefits to 
funds and their shareholders, foster financial innovation, and increase 
the diversity of opportunities for investors. We thus recognize the 
importance of considering and, where appropriate, granting relief as 
efficiently and quickly as possible. However, in light of our statutory 
mission of investor protection and the substantive concerns underlying 
the Act, we also recognize the critical importance of analyzing 
applications carefully to determine whether the relief requested, 
together with any terms and conditions of the relief, meets the 
relevant statutory standards.\27\
---------------------------------------------------------------------------

    \27\ See 15 U.S.C. 80a-6(c).
---------------------------------------------------------------------------

    Over time, some applicants have expressed concern regarding the 
length of time required to obtain an order on both routine and novel 
applications. In 1990, the Commission requested comments on, among 
other things, whether it should adopt different procedures for 
applications.\28\ In response, commenters argued that lengthy review 
procedures delay the commencement of transactions, prevent applicants 
from responding quickly to changing market conditions, and slow the 
entry of new products to the market, all to the detriment of 
investors.\29\ As a result, in 1993, the Commission proposed amendments 
to rule 0-5 under the Act to establish an expedited review procedure 
for certain routine applications.\30\ The Commission, however, did not 
adopt these proposed amendments.
---------------------------------------------------------------------------

    \28\ Request for Comments on Reform of the Regulation of 
Investment Companies, Investment Company Act Release No. 17534 (June 
15, 1990), 55 FR 25322 (the ``Study Release'').
    \29\ See, e.g., Letter from the Subcomm. on Investment Companies 
and Investment Advisers of the Committee on Federal Regulation of 
Securities, Section of Business Law, American Bar Association, to 
Jonathan G. Katz, Secretary, SEC, 7-9 (Oct. 18, 1990), File No. S7-
11-90.
    \30\ See Expedited Procedure for Exemptive Orders and Expanded 
Delegated Authority, Investment Company Act Release No. 19362 (Mar. 
26, 1993). The proposal sought to implement the Staff's 
recommendations from the Protecting Investors report by proposing to 
amend rule 0-5 under the Act to establish an expedited review 
procedure for certain routine applications. See Division of 
Investment Management, SEC, Protecting Investors: A Half Century of 
Investment Company Regulation, Procedures for Exemptive Orders, 503-
522 (1992) (considering comments received in response to the Study 
Release).
---------------------------------------------------------------------------

    In subsequent years, initiatives aimed at improving the application 
process

[[Page 57092]]

have continued. For example, in 2008, the Staff implemented an internal 
performance target of providing initial comments on at least 80 percent 
of applications within 120 days after their receipt.\31\ We believe 
this performance measure has helped make the application process more 
efficient. In 2008, the first year with this performance target, the 
Division provided initial comments within 120 days on 81 percent of 
applications.\32\ By 2010, the Division met this target on 100 percent 
of applications, and has not dropped below 99 percent any year 
since.\33\ For filings made on or after June 1, 2019, the Division 
implemented a new internal target of providing comments on both initial 
applications and amendments within 90 days.\34\ Notwithstanding the 
recent improvements, we have continued to consider ways to improve the 
applications process as we recognize the importance of completing the 
review of an application in an appropriate and timely manner. The rule 
changes we are adopting are intended to improve the efficiency and 
speed of the application process while preserving the ability to assess 
the appropriateness of the requested relief. In addition, the 
Commission has made it a priority to propose and adopt rules to replace 
lines of routine applications.\35\ These rules benefit the application 
process by making the corresponding applications no longer necessary, 
which, in turn, allows the Staff to devote additional resources to 
other, more novel types of applications that can promote further 
industry innovation and expand investment choices for investors.
---------------------------------------------------------------------------

    \31\ Unlike the 1993 proposal to amend rule 0-5 under the Act, 
this performance target was an internal measure and did not involve 
the amendment of any rule. See U.S. Securities and Exchange 
Commission, 2008 Performance and Accountability Report, at 40, 
available at https://www.sec.gov/about/secpar/secpar2008.pdf. See 
also Remarks Before the ICI 2007 Securities Law Developments 
Conference by Andrew J. Donohue, Director, Division of Investment 
Management (Dec. 6, 2007), available at https://www.sec.gov/news/speech/2007/spch120607ajd.htm. In 2006, the Commission's Inspector 
General found that the application process was not always timely and 
provided recommendations for improving the process. See SEC 
Inspector General Report, IM Exemptive Application Processing (Audit 
No. 408), Sept. 29, 2006.
    \32\ See U.S. Securities and Exchange Commission 2008 
Performance and Accountability Report, at 40.
    \33\ See Fiscal Year 2019, Congressional Budget Justification 
Annual Performance Plan, Fiscal Year 2017, Annual Performance 
Report, at 99 available at https://www.sec.gov/files/secfy19congbudgjust.pdf. In addition to the Division's performance 
target for comments on initial filings, the Staff also began 
tracking and seeking the same target for comments on amendments.
    \34\ In fiscal year 2019, after the implementation of the new 
internal target, the Division provided comments within 90 days on 
100% of applications.
    \35\ See, e.g., Exchange-Traded Funds, Investment Company Act 
Release No. 33646 (Sept. 25, 2019); Fund of Funds Arrangements, 
Investment Company Act Release No. 33329 (Dec. 19, 2018) (proposed 
rule). Earlier examples of rules replacing lines of routine 
applications include, among others, 17 CFR 270.3a-7 (rule 3a-7) 
excluding certain structured financings from the definition of 
``investment company'' (Exclusion from the Definition of Investment 
Company for Structured Financings, Investment Company Act Release 
No. 19105 (Nov. 19, 1992) [57 FR 56248 (Nov. 27, 1992)]); amending 
17 CFR 270.15a-4 (rule 15a-4) to address changes in control and 
acquisitions of investment advisers (Temporary Exemption for Certain 
Investment Advisers, Investment Company Act Release No. 24177 (Nov. 
29, 1999) [64 FR 68019 (Dec. 6, 1999)]); and 17 CFR 270.17a-8 (rule 
17a-8) addressing mergers of affiliated investment companies 
(Investment Company Mergers, Investment Company Act Release No. 
25666 (July 18, 2002) [67 FR 48511 (July 24, 2002)]). See also supra 
footnote 23 and SEC Inspector General Report IM Exemptive 
Application Processing (Audit No. 408), Sept. 29, 2006, at 4.
---------------------------------------------------------------------------

C. Factors Affecting the Application Process

    The amount of time necessary for the Staff to review an application 
depends in large part on the nature of the application. The Staff 
generally characterizes applications as falling into one of two general 
categories: (1) Applications that seek novel, largely unprecedented 
relief or relief for which some Commission precedent exists but that 
raises additional questions of fact, law, or policy; and (2) 
applications that seek relief substantively identical to relief that 
the Commission has recently granted (``routine applications'').
    Applications in the first category may involve financial 
innovations or transactions on the forefront of the investment 
management industry. In those instances, substantial time and resources 
are needed to analyze thoroughly the legal and policy issues raised, 
and the recommendations the Staff must make to the Commission often 
include significant policy considerations. As part of this process, the 
Staff generally works with the applicant to refine the proposal and to 
develop appropriate terms and conditions for the relief that address 
the applicable standards under the Act. This process can be time 
consuming.
    The Staff generally should be able to review routine applications 
much more quickly than applications in the first category because the 
Staff has already performed the overall legal and policy analysis 
underlying the requested relief. Sometimes, however, routine 
applications for which there is clear precedent nonetheless contain 
significantly different versions of the terms or representations 
compared to the relevant precedent. These applications require extra 
time to review because the Staff must analyze the changes to determine 
whether they alter the scope or nature of the requested relief. On more 
rare occasions, the Staff may re-evaluate the appropriateness of relief 
previously granted or the terms and conditions associated with the 
relief, or consider whether the relief can appropriately be granted to 
a specific applicant.\36\
---------------------------------------------------------------------------

    \36\ Several additional factors may affect the timing of the 
review including, for example, applicants' responsiveness to Staff 
comments, the number of pending applications, and market or other 
developments that affect the applicants' business plans.
---------------------------------------------------------------------------

    For all applications, the Commission must consider the applicants' 
desire to obtain prompt relief while ensuring it has sufficient time to 
meet its overarching responsibility to consider whether an application 
meets the standard for the requested relief.

II. Discussion of Commission Action

    The rule amendments and rule we are adopting are intended to make 
the application process more efficient and effective in furthering the 
purposes of the Act.\37\ They are also intended to provide additional 
certainty and transparency in the application process. Specifically, we 
are adopting an expedited review process for routine applications, an 
informal internal procedure for applications that would not qualify for 
the expedited process, and a rule to deem an application withdrawn when 
an applicant does not respond in writing to Staff comments within 120 
days.
---------------------------------------------------------------------------

    \37\ Our actions do not concern applications under the 
Investment Advisers Act of 1940 (``Advisers Act''). The Commission 
receives only a few applications under the Advisers Act each year, 
and these applications are filed on paper rather than electronically 
via the EDGAR system. See www.sec.gov/rules/iareleases.shtml. These 
applications are generally fact intensive, so they are less likely 
to qualify for an expedited review process like the one we are 
adopting here. See, e.g., The Jeffrey Company, Investment Advisers 
Act Release Nos. 4659 (Mar. 7, 2017) (Notice of Application) and 
4681 (Apr. 4, 2017) (Order) (family office application). Cf. infra 
footnote 67 and accompanying text.
---------------------------------------------------------------------------

A. Expedited Review Procedure

    In order to expedite the review of routine applications, the 
Commission is adopting amendments to rule 0-5 under the Act, which sets 
forth the procedure for applications under the Act. These amendments 
establish an expedited review procedure for applications that are 
substantially identical to recent precedent. We believe that the 
approach we are adopting balances applicants' desire for a prompt 
decision on their application with the Commission's need

[[Page 57093]]

for adequate time to consider requests for relief.
    We believe that the new procedure will encourage applicants for 
expedited review to submit applications substantially identical to 
precedent, which will help facilitate Staff review. Accordingly, we 
should be able to grant relief that meets the applicable standards more 
quickly, and, in turn, devote additional resources to the review of 
more novel requests.\38\ A more efficient application process will 
allow applicants to realize the benefits of relief more quickly than 
otherwise would be the case.\39\ Further, we believe that the expedited 
review procedure will make the applications process less expensive for 
applicants, because we anticipate that it will reduce the number of 
Staff comments that would require a response and enable applicants to 
have more certainty regarding the timing of application processing. 
Generally, we believe fund shareholders will share in these benefits.
---------------------------------------------------------------------------

    \38\ The Staff will issue notices under delegated authority for 
applications reviewed under the expedited procedure.
    \39\ See infra, discussion in Section III.C.1.
---------------------------------------------------------------------------

1. Eligibility for Expedited Review
    Title 17 CFR 270.0-5(d)(1) (rule 0-5(d)(1)) provides that an 
applicant may request expedited review if the 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.
``Substantially Identical'' Standard
    Like the proposal, 17 CFR 270.0-5(d)(2) (rule 0-5(d)(2)) defines 
``substantially identical'' applications as those requesting relief 
from the same sections of the Act and 17 CFR part 270, containing 
identical terms and conditions, and differing only with respect to 
factual differences that are not material to the relief requested.\40\ 
We intend for applicants only to use the expedited procedure for 
routine applications that are substantially identical to precedent and 
seek the same relief that others have already received, so that 
additional consideration generally is unnecessary. The ``substantially 
identical'' requirement will help to ensure that applicants use the 
procedure only when they do not need to modify the terms and conditions 
of the precedent applications and are not raising new issues for the 
Commission to consider.\41\ In addition, the requirement will help to 
ensure that applicants submit applications that include language that 
is substantially identical to the language of the precedent 
applications, which will facilitate Staff review.
---------------------------------------------------------------------------

    \40\ Factual differences not material to the relief requested 
might include the applicants' identities, the state of legal 
organization of a fund, and the constitution of the fund's board of 
directors.
    \41\ Even small changes to the terms and conditions of an 
application, compared to a precedent application, may either raise a 
novel issue or require a significant amount of time for the Staff to 
consider whether a novel issue is raised. See supra Section I.C.
---------------------------------------------------------------------------

    Two commenters generally supported the proposed ``substantially 
identical'' standard to qualify for expedited review.\42\ A number of 
other commenters, instead, suggested broadening this standard, as well 
as clarifying certain aspects of it.\43\
---------------------------------------------------------------------------

    \42\ See Capital Group Comment Letter; Abigail Najera Comment 
Letter.
    \43\ See ICI Comment Letter; SIFMA AMG Comment Letter; Fidelity 
Comment Letter; AIC Comment Letter.
---------------------------------------------------------------------------

    Commenters suggested several different modifications to our 
proposed ``substantially identical'' standard. A few commenters 
suggested that the standard be changed so that applications would need 
to be ``substantially identical in all applicable respects'' to 
precedent.\44\ One of these commenters suggested that the Commission 
could require each applicant to explain in its expedited application 
why particular conditions in precedent are irrelevant.\45\ Another 
commenter recommended that the expedited application's terms and 
conditions be substantially identical and differ only with respect to 
factual differences that are not material to the relief requested.\46\ 
An additional commenter suggested that ``substantially identical'' be 
replaced with objective criteria, but did not provide specific 
suggestions, or that ``substantially identical'' be defined as 
differences ``not relevant in any material respects.'' \47\
---------------------------------------------------------------------------

    \44\ See ICI Comment Letter (``We also request that the 
Commission clarify that an application for expedited review may 
contain conditions that are substantially identical in all 
applicable respects with those set forth in prior precedent.''); 
Fidelity Comment Letter (suggesting that ``in place of the 
`substantially identical' standard, an application for expedited 
review must contain terms and conditions that are substantially 
identical to prior precedent `in all applicable respects' '').
    \45\ See ICI Comment Letter.
    \46\ See AIC Comment Letter.
    \47\ See SIFMA AMG Comment Letter.
---------------------------------------------------------------------------

    We are adopting the ``substantially identical'' standard largely as 
proposed. With the expedited process, we are seeking to create a new 
process that is both faster and more certain in its timing than the 
current process while maintaining sufficient time for the Staff to 
evaluate applications that may raise novel issues. The ``substantially 
identical standard'' accomplishes that because it makes the expedited 
procedure only available for applications that closely track precedent. 
In most cases under this standard, the Staff should be able to issue a 
notice within 45 days without issuing any comments to the applicant 
first.\48\ Modifying the standard to permit more extensive differences 
from precedent applications would require the Staff to inquire about 
and consider the nature of these differences, which would frustrate the 
objective of creating a quick review process with increased certainty. 
Additionally, permitting more extensive differences from precedent 
would likely lead the Staff to issue more comments in the expedited 
process and/or transfer applications to the standard process, which 
could significantly impair our ability to achieve the objectives of the 
expedited process.
---------------------------------------------------------------------------

    \48\ See supra, discussion in Section II.A about reducing the 
number of Staff comments.
---------------------------------------------------------------------------

    For the same reason, we are not, as some commenters suggested, 
modifying the rule to allow for ``mix and match'' precedent 
applications, i.e., applications that combine portions or sections of 
different prior applications.\49\ Applications that mix and match 
multiple precedents will not meet the ``substantially identical'' 
standard in the rule.\50\ Different lines of applications often have 
sections that are interconnected with each other in particular ways. In 
the Staff's experience, the reviews of applications combining different 
lines of precedent require analysis of whether all the relevant terms 
and conditions have been carried forward appropriately and work 
together in a manner consistent with each of the relevant precedents. 
Such reviews have resulted in a significant number of comments, 
rendering such applications inconsistent with the approach to, and 
purpose underlying, the expedited process.
---------------------------------------------------------------------------

    \49\ See ICI Comment Letter; Fidelity Comment Letter.
    \50\ See Proposing Release, supra footnote 2, at n. 29.
---------------------------------------------------------------------------

    Several commenters requested clarifications relating to the 
``substantially identical'' standard. One commenter asked the 
Commission to clarify the use of the word ``terms'' in the requirement 
that an expedited application must contain ``identical terms and 
conditions'' compared to precedent.\51\ Reference to the ``terms'' of 
an application in rule 0-5(d)(2) means the representations in an 
application that are material to the requested relief. Terms are 
separate and apart from any

[[Page 57094]]

express conditions included in the application.
---------------------------------------------------------------------------

    \51\ See ICI Comment Letter.
---------------------------------------------------------------------------

    The same commenter also asked the Commission to identify in detail 
any information in an application other than the requested relief and 
the registrant-provided conditions that must be substantially identical 
to prior precedent to meet the ``substantially identical'' 
requirement.\52\ Based on the Staff's experience, applications that 
involve the same types of entities, request the same relief, and are 
subject to the same terms and conditions as precedent, would usually be 
``substantially identical'' notwithstanding minor differences, such as 
different names and places of legal organization.\53\ The reference to 
``identical'' terms and conditions requires that not only the substance 
of the terms and conditions be the same, but also that their wording be 
the same. Applications that are ``substantially identical'' may also 
have other factual differences not relating to the terms and conditions 
of the application.
---------------------------------------------------------------------------

    \52\ See id.
    \53\ Some commenters expressed concern about whether applicants 
with different affiliate structures from precedent applications 
would be able to satisfy the ``substantially identical'' standard. 
See ICI Comment Letter; Fidelity Comment Letter. To the extent that 
an applicant's affiliate structure is material to the relief 
requested, the applicant would not be able to meet the 
``substantially identical'' standard.
---------------------------------------------------------------------------

    In a similar vein, this commenter suggested that alternatively we 
issue standard template conditions for routine or frequently requested 
applications for exemptive relief.\54\ Recent precedent would normally 
reflect the latest approved terms and conditions, so we do not believe 
creating a template would increase the effectiveness of the rule. We 
believe that when a line of applications becomes so routine that 
standard terms and conditions could be articulated, a better approach 
would be to consider codifying such relief in a new rule under the Act 
that would make applications unnecessary.\55\ Further, as noted above, 
minor modifications would generally not disqualify an application from 
the expedited review process. Applicants may also use the standard 
review process to make more extensive modifications to develop new 
lines of relief.
---------------------------------------------------------------------------

    \54\ See ICI Comment Letter.
    \55\ Several commenters encouraged the Commission periodically 
to codify exemptive relief in rules. See Diane Smith Comment Letter; 
ICI Comment Letter.
---------------------------------------------------------------------------

    Finally, another commenter requested that the Commission provide 
guidance regarding the objective criteria used to determine that an 
application is ``substantially identical'' to a precedent application 
(and therefore eligible for expedited review).\56\ Under the rule 
amendments we are adopting, ``substantially identical'' applications 
are applications containing identical terms and conditions, and 
differing only with respect to factual differences that are not 
material to the relief requested. While it is impossible to identify 
what all those factual differences may be for any future line of 
expedited applications, we believe that filed applications that have 
been approved, including any amendments thereto, will provide 
additional useful guidance to applicants in this respect.
---------------------------------------------------------------------------

    \56\ See SIFMA AMG Comment Letter.
---------------------------------------------------------------------------

Number of Precedents
    Under the rule as adopted, an application may be filed under 
expedited review if it is substantially identical to two precedent 
applications for which an order granting the requested relief has been 
issued within three years of the date of the application's initial 
filing.\57\ Some commenters suggested that we only require one 
precedent application to qualify for expedited review.\58\ One of these 
commenters opined that where the Commission is comfortable enough to 
provide relief to one applicant, subsequent applicants that meet the 
requirements should receive the same treatment.\59\ Other commenters, 
instead, agreed with our proposal that two precedents is an appropriate 
number to qualify for an expedited review process.\60\
---------------------------------------------------------------------------

    \57\ See rule 0-5(d)(1). An application may be filed under 
expedited review if it is substantially identical to more than two 
qualifying precedent applications as well. However, such an 
application would include exhibits with marked copies showing 
changes from only two qualifying precedent applications and an 
accompanying cover letter explaining why those two precedents were 
chosen. See 17 CFR270.0-5(e)(2) (rule 0-5(e)(2)) and (e)(3) (rule 0-
5(e)(3)).
    \58\ See SIFMA AMG Comment Letter; Stradley Comment Letter.
    \59\ See SIFMA AMG Comment Letter.
    \60\ See ICI Comment Letter; Fidelity Comment Letter.
---------------------------------------------------------------------------

    After considering these comments, we continue to believe that 
requiring a minimum of two precedents is appropriate. As one of the 
commenters supporting our proposal noted, two prior precedents 
demonstrate that a line of relief is established so that a faster 
review is appropriate, while minimizing burdens on applicants.\61\
---------------------------------------------------------------------------

    \61\ See ICI Comment Letter.
---------------------------------------------------------------------------

Lookback Period
    We proposed to require that the precedents used for expedited 
review have been issued within the last two years prior to the filing 
of the application in question.\62\ The proposed two-year requirement 
was designed to help ensure that the precedents are relatively recent, 
so that in most cases, it is less likely that there would be questions 
as to whether the terms and conditions of the precedent applications 
are still appropriate. We requested comment on whether the two year 
standard was appropriate. After consideration of the comments we 
received, discussed further below, we are extending the lookback period 
to three years.
---------------------------------------------------------------------------

    \62\ See Proposing Release, supra footnote 2, at 13.
---------------------------------------------------------------------------

    One commenter believed our proposed two-year lookback period was 
too long given the rate of change in the investment management 
industry, and said it should be 18 months.\63\ Most commenters, 
however, thought it was too short. They argued that it should be five 
years to make the expedited procedure more widely available considering 
that there may be lines of applications that continue to be routine 
even if the Commission has not approved two applications in that line 
within the last two years.\64\ Several of these commenters also 
proposed alternative options. One commenter proposed an alternative of 
one application within three years, and two within five years.\65\ 
Another commenter proposed an alternative of one application within two 
years, and two within five years.\66\
---------------------------------------------------------------------------

    \63\ See Abigail Najera Comment Letter (18 months would ``ensure 
immediate relevance'' of the precedents selected).
    \64\ See AIC Comment Letter; Fidelity Comment Letter; ICI 
Comment Letter; SIFMA AMG Comment Letter; Stradley Comment Letter.
    \65\ See AIC Comment Letter.
    \66\ See SIFMA AMG Comment Letter.
---------------------------------------------------------------------------

    In choosing the proposed lookback period, we sought to make the 
expedited procedure available only when more limited review is needed 
to ensure that an application include terms and conditions that justify 
granting the requested relief. Accordingly, we sought to exclude from 
expedited review applications that used older precedent, which the 
Staff would need to reevaluate in light of industry and regulatory 
developments.
    We believe that extending the lookback period to five years would 
frustrate our goal of creating a quicker and more efficient review 
process for appropriate applications. In particular, the Staff needs to 
review all applications that were approved after the precedent that 
applicant is relying on to ensure that the precedent includes up to 
date terms and conditions, and is otherwise consistent with the 
Commission's current policies. As a

[[Page 57095]]

result, the longer the lookback period is, the longer the review 
process needs to be. Based on Staff review of application filings, we 
believe that most lines of applications appropriate for the expedited 
review process will have at least two precedents in the two-year time 
period we proposed. We also believe extending the lookback period to 
three years in response to commenters' views will provide applicants 
with additional flexibility, without frustrating our goals described 
above. Accordingly, we are modifying the lookback period to three 
years.
    Because we are extending the lookback period in response to the 
comments we received, to facilitate Staff review, we have revised the 
rule to require applicants to explain in their cover letter why they 
chose the particular precedents they are using. If more recent 
precedents were available, the applicant must explain why the 
precedents used, rather than the more recent precedents, are 
appropriate. This new provision will help ensure that applicants will 
only use older precedent when there is a good reason for doing so and 
will support the efficiency of the process by aiding the Staff's review 
of whether the precedent is appropriate.
Lines of Applications That Might Not Qualify for Expedited Review
    Our proposal stated that certain kinds of applications appeared 
highly unlikely to be suitable for expedited review. These included, 
for example, applications filed under sections 2(a)(9), 3(b)(2), 6(b), 
9(c), and 26(c) of the Act.\67\ We explained that these types of 
applications are generally too fact-specific for applicants to be able 
to meet the substantially identical standard. Our proposal also said 
that other lines of applications would also usually not meet the 
standard for expedited review.\68\
---------------------------------------------------------------------------

    \67\ See e.g., Bridgeway Capital Management, Inc., Investment 
Company Act Release Nos. 28685 (Apr. 1, 2009) (Notice of 
Application) and 28716 (Apr. 28, 2009) (Order) (declaration 
regarding control, section 2(a)(9) application); Exact Sciences 
Corporation, Investment Company Act Release Nos. 33228 (Sept. 14, 
2018) (Notice of Application) and 33267 (Oct. 11, 2018) (Order) 
(inadvertent investment companies, section 3(b)(2) application); 
Hudson Advisors L.P., et al. Investment Company Act Release Nos. 
32804 (Aug. 31, 2017) (Notice of Application) and 32834 (Sept. 26, 
2017) (Order) (employees securities company, section 6(b) 
application); Charles Schwab & Co. Inc. and Charles Schwab 
Investment Management, Inc., Investment Company Act Release Nos. 
33157 (July 10, 2018) (Notice of Application) and 33195 (Aug. 7, 
2018) (Order) (ineligible--disqualified firm, section 9(c) 
application); AXA Equitable Life Insurance Company, et al., 
Investment Company Act Release Nos. 33201 (Aug. 15, 2018) (Notice of 
Application) and 33224 (Sept. 11, 2018) (Order) (fund substitution, 
section 26(c) application).
    \68\ See Proposing Release, supra footnote 2, at n.32. See infra 
footnote 75.
---------------------------------------------------------------------------

    In our proposal, we requested comment on whether these types of 
applications are unlikely to be suitable for expedited review and 
whether the proposed rule should explicitly exclude them from expedited 
review.
    Some commenters argued that the rule should explicitly exclude 
certain types of applications, with one commenter recommending that we 
should exclude all of the applications discussed, as the Commission did 
in its 1993 expedited review proposal,\69\ to avoid creating 
uncertainty about such applications.\70\ Other commenters suggested 
excluding applications under section 26(c) of the Act,\71\ or 
applications that ``change the deal'' on investors, saying that such 
applications should only be granted sparingly after appropriate and due 
consideration.\72\
---------------------------------------------------------------------------

    \69\ See supra footnote 30.
    \70\ See Comment Letter of John Smith (Nov. 29, 2019) (``John 
Smith Comment Letter'') (noting that when the Commission proposed 
expedited review procedures in 1993, it explicitly excluded certain 
types of applications, and that in the Proposing Release we did not 
explain why we are reversing that position).
    \71\ See Capital Group Comment Letter (stating that the 
Commission's and Staff's role in evaluating these applications is 
critical because they present conflicts of interest in which 
investors' judgment is being replaced).
    \72\ See Ed Snoke Comment Letter (pointing, as examples, to 
substitution and multi-class applications).
---------------------------------------------------------------------------

    Another commenter disagreed with our statement in the Proposing 
Release that co-investment applications would usually not meet the 
standard for expedited review.\73\ This commenter stated that co-
investment applications could satisfy the ``substantially identical'' 
standard, and that they should be eligible for expedited review.\74\
---------------------------------------------------------------------------

    \73\ See AIC Comment Letter.
    \74\ See id.
---------------------------------------------------------------------------

    After considering these comments, we are not explicitly excluding 
any particular types of applications from expedited review. We continue 
to believe, based on Staff experience, that certain lines of 
applications will generally not satisfy such standard because they are 
too fact specific to meet the substantially identical standard, as 
discussed above.\75\ That is, while the terms and conditions may be 
substantially identical, the Staff looks at particular facts and 
circumstances outlined in the application to evaluate whether the 
requested relief meets the applicable standard.\76\ Were circumstances 
to arise, however, in which an application in those lines can satisfy 
the ``substantially identical'' standard, the Staff may be able to 
proceed under expedited review.\77\ If rule 0-5 explicitly excluded 
those applications from expedited review, the Staff would not have such 
option regardless of whether the application in substance is suited for 
expedited review. We believe that maintaining this flexibility is 
important so as not to frustrate the purpose of the rule.
---------------------------------------------------------------------------

    \75\ In addition to the lines of applications discussed in our 
proposal, investment company deregistration applications filed under 
section 8(f) are also unlikely to be suitable for expedited review.
    \76\ For example, when considering applications seeking an order 
under section 3(b)(2) of the Act declaring an applicant to be 
engaged in a business other than that of investing, reinvesting, 
owning, holding, or trading securities, we examine, among other 
things, the applicant's historical development, public 
representations of policy, directors' and officers' activities, as 
well as the nature of the applicant's assets and the sources of its 
income. See e.g., Lyft, Inc., Investment Company Act Release Nos. 
33399 (Mar. 14, 2019) (Notice of Application) and 33442 (Apr. 8, 
2019) (Order).
    \77\ Co-investment applications that meet the substantially 
identical standard will also be eligible for expedited review. See 
supra footnote 68, Proposing Release at footnote 32.
---------------------------------------------------------------------------

2. Additional Information Required for Expedited Review
    Applicants seeking expedited review will need to include certain 
information with the application under 17 CFR 270.0-5(e) (rule 0-5(e)), 
as we had proposed. Title 17 CFR 270.0-5(e)(1) (rule 0-5(e)(1)) 
requires that the cover page of the application include a notation 
prominently stating ``EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-
5(d).'' This requirement will assist the Staff in quickly identifying 
and effectively processing the request for expedited review. Rule 0-
5(e)(2) requires applicants to submit exhibits with marked copies of 
the application showing changes from the final versions of the two 
precedent applications. These exhibits will help the Staff to readily 
discern any variations between the application seeking expedited review 
and the precedent applications. Rule 0-5(e)(3) requires an accompanying 
cover letter, signed, on behalf of the applicant, by the person 
executing the application, (i) identifying the two substantially 
identical applications that serve as precedent, explaining why the 
applicant chose those particular precedents, and, if more recent 
applications of the same type have been approved, why the precedents 
chosen, rather than the more recent applications, are appropriate; and 
(ii) certifying that the applicant believes the application meets the 
requirements of 17 CFR 270.0-5(d) (rule 0-5(d)) and that the marked 
copies required by rule

[[Page 57096]]

0-5(e)(2) are complete and accurate.\78\ These requirements are largely 
the same as proposed, with one modification to include the requirement, 
discussed in Section II.A.1 above, to explain why the applicant chose 
particular precedents.
---------------------------------------------------------------------------

    \78\ Section 34(b) of the Act makes it unlawful for any person 
to make any untrue or misleading statement of material fact in any 
registration statement, application, report, account, record, or 
other document filed or transmitted under the Act, or to omit from 
any such document any fact necessary in order to prevent the 
statements made therein from being materially misleading. We 
recognize that in certain cases an applicant and its counsel may 
view an application to be ``substantially identical'' under rule 0-
5(d)(2), even if the application is ultimately found not to meet 
such requirement under 17 CFR 270.0-5(f)(1)(ii) (rule 0-
5(f)(1)(ii)). Complete and accurate marked copies must, among other 
things, show the changes in the application from the final versions 
of the two precedents that were filed on EDGAR (as opposed to 
earlier drafts).
---------------------------------------------------------------------------

    We requested comment on whether the proposed requirements were 
appropriate. One commenter supported our proposed requirement for this 
additional information, saying that it did not believe the requirements 
would be unduly burdensome.\79\ Another commenter suggested that even 
if we require two precedents, marked copies against both precedents 
would be redundant and of limited value, and we should only require one 
marked copy.\80\ The commenter further stated that the cover letter and 
certification are also unnecessary because the marked copy will 
indicate the precedent used, and the notation on the cover page 
indicates that the applicant believes that the application qualifies 
for expedited review. The commenter suggested that we could instead 
require applicants seeking expedited treatment to expand the 
verification required by 17 CFR 270.0-2(d) (rule 0-2(d) under the Act) 
to verify that the marked copies submitted to qualify for expedited 
treatment are complete and accurate to the best of the signer's 
knowledge.\81\
---------------------------------------------------------------------------

    \79\ See ICI Comment Letter.
    \80\ See Stradley Comment Letter.
    \81\ See id.
---------------------------------------------------------------------------

    After considering these comments, we continue to believe that the 
additional information we are requesting will help ensure the expedited 
procedure works as intended without being unduly burdensome to 
applicants. First, we believe it is necessary for the Staff to review 
marked copies of the application against both precedents submitted in 
order to allow the Staff to verify whether the new application is 
substantially identical to both such precedents. Second, while we 
understand that the fact that an application is filed for expedited 
review, as indicated by its cover page notation, may implicitly convey 
that the applicant believes it qualifies for expedited review, the 
requirement for a certification in the cover letter should work to 
ensure that applicants have confirmed that the application meets all 
the requirements for the expedited review.\82\ Expanding the 
verification required by rule 0-2(d), as suggested by one commenter, 
would not serve the same function as this requirement because rule 0-
2(d) does not address the qualification requirements of the new 
expedited review process. Additionally, because the applicants make, 
review, and submit to the Commission the marked copies, we believe they 
can certify that such marked copies are complete and accurate. 
Accordingly, we are adopting 17 CFR 270.0-5(e) (rule 0-5(e)) 
substantially as proposed.
---------------------------------------------------------------------------

    \82\ To the extent applicants' confirmation helps prevent the 
submission of applications that are not suitable for expedited 
review, Staff time and resources will not be spent unnecessarily, 
and our overall objective of efficiency will be furthered.
---------------------------------------------------------------------------

3. Expedited Review Timeframe
    Under 17 CFR 270.0-5(f), a notice for an application submitted for 
expedited review will be issued no later than 45 days from the date of 
filing \83\ unless the applicant is notified that the application is 
not eligible for expedited review because (i) it does not meet the 
criteria in rule 0-5(d) or rule 0-5(e), or (ii) additional time is 
necessary for appropriate consideration of the application. We have 
changed the timeline for the Staff's review of unsolicited amendments, 
as discussed below. We are also modifying this portion of the rule to 
clarify that an application will not be eligible for the expedited 
review procedure if it does not comply with the requirements of rule 0-
5(e).
---------------------------------------------------------------------------

    \83\ Notice of the application, followed by an order concluding 
the matter, will be issued under current rule 0-5(a) and (b), 
respectively.
---------------------------------------------------------------------------

    We proposed 45 days as the timeframe for expedited review, based on 
the Division's experience considering and acting on routine 
applications. Commenters were generally supportive of the 45-day 
timeframe.\84\
---------------------------------------------------------------------------

    \84\ See, e.g., ICI Comment Letter; Fidelity Comment Letter; 
SIFMA AMG Comment Letter; SBIA Comment Letter.
---------------------------------------------------------------------------

    While we anticipate that the notice for an application meeting rule 
0-5(d)'s criteria will typically be issued within the 45-day timeline, 
there may be situations where further consideration is necessary for 
appropriate consideration of the application.\85\ These may include, 
for example, cases where the Commission is considering a change in 
policy that would make the requested relief, or its terms and 
conditions, no longer appropriate. There also may be cases where the 
Staff is investigating potential violations of Federal securities laws 
that may be relevant to the request for relief.\86\ In such cases, the 
Staff might not be in a position to make a determination on the 
application at the end of the 45-day period.
---------------------------------------------------------------------------

    \85\ One commenter, noting that our proposed new rule for 
applications outside of expedited procedure states that it does not 
create enforceable rights, suggested that we clarify whether the new 
expedited review process creates an enforceable right for 
applicants, and if so, what possible damages would be. See John 
Smith Comment Letter. The creation of a new expedited process under 
rule 0-5 does not create any enforceable rights (in judicial 
proceedings or otherwise).
    \86\ To the extent such circumstances are nonpublic and are not 
known to the applicant, the Staff may not be able to inform the 
applicant of the reason for the delay.
---------------------------------------------------------------------------

    If the Staff notifies the applicant under rule 0-5(f)(1)(ii) that 
an application is not eligible for expedited review, it will give the 
applicant the option to either withdraw the application or amend it to 
make changes so that the application could proceed outside of the 
expedited review process. In connection with the amendments to rule 0-
5, we are also amending 17 CFR 200.30-5 to delegate to the Division 
Director the authority to notify an applicant under rule 0-5(f)(1)(ii) 
that an application pursuant to the Act is not eligible for expedited 
review under rule 0-5.
    Certain conditions will govern the operation of the 45-day time 
period. We proposed that the 45-day period would restart upon the 
filing of any amendment that the Commission or Staff did not solicit 
because the Staff would need additional time to review the change or 
changes made in such an amendment.
    Several commenters had suggestions for modifying the timeframe for 
unsolicited amendments in expedited review.\87\ One commenter stated 
that applicants sometimes amend applications to correct or update 
factual information that is immaterial to the legal analysis or request 
for relief.\88\ This commenter and others recommended that we instead 
establish a 14-day pause for immaterial unsolicited amendments, and a 
45-day period only for material unsolicited amendments.\89\ Another 
commenter suggested that the review period for unsolicited amendments 
be limited to 14 days when the applicant provides the Staff with a 
representation

[[Page 57097]]

that the amendment does not contain material changes and the applicant 
supplies a marked copy of the amendment highlighting the changes from 
the previous filing.\90\
---------------------------------------------------------------------------

    \87\ See ICI Comment Letter; SIFMA AMG Comment Letter; Fidelity 
Comment Letter.
    \88\ See ICI Comment Letter.
    \89\ See ICI Comment Letter; Fidelity Comment Letter.
    \90\ See SIFMA AMG Comment Letter.
---------------------------------------------------------------------------

    We understand that these modifications would provide applicants 
more flexibility to make changes to their application without 
triggering another 45-day review period. We believe, however, that it 
is important for the benefits created by such flexibility to justify 
the resulting burden on the review process. Accordingly, we are 
changing the timeline for Staff review of unsolicited amendments to 30 
days. The expedited process rule that we are adopting pauses the 45-day 
review period upon the filing of an unsolicited amendment, and the 45-
day review period resumes running on the 30th day after such amendment 
is filed.\91\ Notwithstanding this provision, however, the Staff may 
act before the end of such pause, if the unsolicited amendment only 
encompasses minor changes. We believe that this modification will 
increase applicants' flexibility to revise their applications by 
shortening the resulting potential extension of the timeline, while 
still providing the Staff with sufficient time to review such 
unsolicited changes.
---------------------------------------------------------------------------

    \91\ See 17 CFR 270.0-5(f)(2)(i)(B).
---------------------------------------------------------------------------

    In addition, as proposed, any comment by the Staff requesting a 
modification of the application will pause the 45-day period. Although 
the Commission anticipates that the Staff will issue few such comments 
on an application that qualifies for expedited review, there may be 
times when a comment is necessary, for example, to either reflect an 
event that occurred after the application was filed or to resolve 
technical matters.\92\ There may also be times when a revised term or 
condition is being added in a line of routine applications and the 
Staff may ask applicants to make corresponding changes to their 
application.
---------------------------------------------------------------------------

    \92\ In cases where an application is not substantially 
identical to precedent, the Staff will notify the applicant under 
rule 0-5(f)(1)(ii) that the application is not eligible for 
expedited review. Using the comment process to ensure that an 
application is substantially identical to precedent would require 
Staff time and defeat the purpose of the expedited review process. 
See supra Section II.A.1. We believe that, as applicants gain 
familiarity with the ``substantially identical'' standard in 
practice, the application process will run smoothly.
---------------------------------------------------------------------------

    The amended rule provides that the 45-day period will pause upon 
such a request by the Staff and will resume 14 days after the filing of 
an amended application that is responsive to such request. The Staff 
will need the additional time to review the amended application and 
determine whether a notice can be issued under 17 CFR 270.0-5(f)(1)(i). 
Based on the Division's experience regarding amendments to routine 
applications, we are adopting 14 days as the appropriate amount of time 
for the Staff to make this determination. Commenters were supportive of 
this aspect of the rule.\93\
---------------------------------------------------------------------------

    \93\ See Fidelity Comment Letter; ICI Comment Letter.
---------------------------------------------------------------------------

    Additionally, the rule provides that the 45-day period will pause 
upon any irregular closure of the Commission's Washington, DC office to 
the public for normal business, including, but not limited to, closure 
due to a lapse in Federal appropriations, national emergency, inclement 
weather, or ad hoc Federal holiday. The 45-day period will resume upon 
the reopening of the Commission's Washington, DC office to the public 
for normal business.\94\
---------------------------------------------------------------------------

    \94\ See 17 CFR 270.0-5(f)(2)(i)(C).
---------------------------------------------------------------------------

    The rule further provides that, if applicants do not file an 
amendment responsive to the Staff's requests for modification within 30 
days of receiving such requests, including a marked copy showing any 
changes made and a certification that such marked copy is complete and 
accurate, the application will be deemed withdrawn.\95\ This withdrawal 
will be without prejudice, but if the applicant were to resubmit the 
application, a new timeframe would begin. In adopting this rule, we are 
committing to processing routine applications promptly. We believe that 
applicants seeking to benefit from the expedited processing should act 
expeditiously.\96\
---------------------------------------------------------------------------

    \95\ See infra footnote 119.
    \96\ If an applicant takes longer than 30 days to respond to 
Staff comments, the application may not be appropriate for expedited 
review.
---------------------------------------------------------------------------

B. Timeframe for ``Standard Review'' of Applications

    In addition to an expedited review process, the Commission is also 
adopting a rule to provide a timeframe for all other applications filed 
under rule 0-5. We believe that rule 17 CFR 202.13 will provide 
applicants with added transparency regarding the timing of the review 
of applications. Currently, the Division uses an internal performance 
timeline to govern the timing of Staff responses to applications and 
amendments. While the Staff in recent years has been successful in 
meeting the applicable timeline, and has recently moved to the same 90-
day timeline set forth by the proposed rule,\97\ the rule should result 
in a more transparent timeline, including the time at which the Staff 
would forward an application to the Commission. We are modifying the 
rule from the proposal to shorten the timeline for Staff action in some 
instances.
---------------------------------------------------------------------------

    \97\ See supra Section II.B.
---------------------------------------------------------------------------

    Under the rule we are adopting, the Staff should take action on the 
application within 90 days of the initial filing and each of the first 
three amendments thereto, and within 60 days of any subsequent 
amendment.\98\ In addition, the Staff may grant 60-day extensions, and 
applicants should be notified of any such extension.\99\
---------------------------------------------------------------------------

    \98\ As with the expedited review process, the standard review 
period will also pause upon any irregular closure of the 
Commission's Washington, DC office to the public for normal 
business. See 17 CFR 202.13(a).
    \99\ The provisions of this rule, including the timeframes 
provided for, are not intended to create enforceable rights by any 
interested parties and shall not be deemed to do so. Rather, this 
rule provides informal non-binding guidelines for the Division and 
procedures that the Commission anticipates the Division following. 
See 17 CFR 202.13(c).
---------------------------------------------------------------------------

    For the purposes of the rule, and as proposed, action on an 
application or amendment consists of (i) issuing a notice of 
application; (ii) providing the applicants with comments; or (iii) 
informing the applicants that the application will be forwarded to the 
Commission, in which case the application is no longer subject to 
paragraph (a) of the rule.\100\ If the Staff does not support the 
requested relief, the Staff typically notifies applicants that it would 
recommend that the Commission deny the application and gives applicants 
the opportunity to withdraw the application before such recommendation 
is made.\101\
---------------------------------------------------------------------------

    \100\ See 17 CFR 202.13(b).
    \101\ See supra footnote 16.
---------------------------------------------------------------------------

    We requested comment on this timeframe for ``standard review'' of 
applications.\102\ There was broad support generally for our proposed 
90-day timeframe for initial applications.\103\ Several commenters 
recommended limiting the Staff's ability to extend the review period or 
reducing the Staff's time to review amendments. One commenter suggested 
that the Commission enumerate the circumstances upon which the Staff 
can grant itself 90-day extensions, and/or provide only the Division 
Director the ability to grant extensions on matters not enumerated but 
substantially similar to those described in the rule.\104\
---------------------------------------------------------------------------

    \102\ See Proposing Release, supra footnote 2, at 22.
    \103\ See, e.g., ICI Comment Letter; Fidelity Comment Letter; 
SIFMA AMG Comment Letter.
    \104\ See ICI Comment Letter. The commenter further recommended 
that the Commission require the Division Director to review and/or 
approve additional extensions beyond the first 90-day extension. 
While it might not be practicable for the Director only to be able 
to review and approve extensions, we expect that the Division will 
review and approve such extensions in situations where necessary for 
the appropriate consideration of an application.

---------------------------------------------------------------------------

[[Page 57098]]

    Two commenters suggested ways of constraining the Staff's ability 
to grant multiple 90-day extensions.\105\ One of those commenters 
recommended that the Commission consider a deadline for final action on 
standard review applications.\106\ The other commenter stated that the 
ability to issue unlimited 90-day extensions would undermine the 
efficacy of the proposed standard review timeframe, and suggested an 
approach similar to expedited review in which the 90-day period would 
pause, as opposed to restart, for the comment process, and only restart 
upon applicants filing an unsolicited amendment.\107\
---------------------------------------------------------------------------

    \105\ See Stradley Comment Letter; Fidelity Comment Letter.
    \106\ See Stradley Comment Letter.
    \107\ See Fidelity Comment Letter.
---------------------------------------------------------------------------

    Three commenters suggested shortening the length of the extensions 
and reducing the review time for amendments.\108\ One commenter 
suggested extensions should be for 30 days, so that the maximum 
internal deadline would be 120 days, absent an amendment.\109\ Another 
commenter stated that a 90-day extension period is excessive and that 
it should be shortened to 45 days.\110\ That commenter said that 
because Staff reviews of subsequent amendments are not de novo, they 
should not take as long as the review of the initial application 
filing.\111\ Another commenter recommended that for applications under 
standard review, the Staff have 14 business days to review solicited 
amendments and immaterial unsolicited amendments, and 90 business days 
to review material unsolicited amendments.\112\
---------------------------------------------------------------------------

    \108\ See Stradley Comment Letter; SIFMA AMG Comment Letter; ICI 
Comment Letter.
    \109\ See Stradley Comment Letter.
    \110\ See SIFMA AMG Comment Letter.
    \111\ See id.
    \112\ See ICI Comment Letter.
---------------------------------------------------------------------------

    In addition to comments regarding the timeframe, we received a few 
comments that addressed whether Staff action should be required. One 
commenter stated that the proposed rule would undermine the 
Commission's policy goals because it only states that the Staff 
``should take action'' without actually requiring Staff action within 
90 days. The commenter suggested that we require Staff action or 
communication to the applicant to occur within 90 days.\113\ That 
commenter further suggested that any such required actions or 
communications include providing applicants with substantive status 
updates, such as whether the Division has shared the applications with 
another Commission division.\114\ Another commenter recommended that we 
require the Staff to provide applicants with an update regarding the 
status of their application at approximately the mid-point of the 
review period.\115\
---------------------------------------------------------------------------

    \113\ See id.
    \114\ See id.
    \115\ See SIFMA AMG Comment Letter.
---------------------------------------------------------------------------

    We are adopting the rule with modifications to address some 
concerns raised by commenters. Our intention is to provide applicants 
with more transparency and certainty regarding the timing of the review 
of applications. At the same time, it is essential that the Staff 
retain the ability to appropriately consider the relevant legal and 
policy issues. By filing an application, applicants are seeking 
exemptions or other relief under the Act. The Division may grant such 
relief under delegated authority only if the applicable standard is 
satisfied. Accordingly, the rule must preserve some flexibility for 
situations where more time is needed for appropriate consideration of 
an application. If the rule were to limit the number of extensions, and 
the Staff were not in the position to approve an application under 
delegated authority, the Staff might be unable to recommend that the 
Commission approve the application. Such a result would make the 
application process less efficient than the alternative of a further 
extension.
    In response to the concerns raised about the possibility of the 
comment process extending too long, however, the final rule provides 
for shorter timelines than those we proposed in order to provide 
shorter timeframes for Staff review of certain subsequent amendments. 
In particular, the rule provides that after the third amendment to an 
application, the Staff should take action on any subsequent amendments 
within 60 days of their filing.\116\ We also are decreasing the length 
of any extensions to the timelines by the Staff from 90 days to 60 
days.\117\ We believe these changes will help move the review process 
towards its conclusion, while at the same time preserving the 
flexibility that the Staff needs to make sure that the requested relief 
satisfies the relevant statutory standard.
---------------------------------------------------------------------------

    \116\ See 17 CFR 202.13(a). We do not believe that the review 
process for amendments to applications should always be shorter than 
the initial review. With many novel applications, or other 
applications departing from precedent, the Staff's initial comments 
typically identify threshold issues, which the Staff then considers 
more in depth in subsequent reviews of the application, on the basis 
of the applicants' responses. The Staff's review of those responses, 
as well as discussions on how to address those issues in the 
applications, often take more time than the review of the initial 
filing. Accordingly, we do not believe that a shorter review period 
for the first few amendments is appropriate.
    \117\ See 17 CFR 202.13(a).
---------------------------------------------------------------------------

    Applicants' responsiveness to Staff comments is an essential 
component of a successful and timely application process. We have 
previously stated that the Staff should not have to spend an inordinate 
amount of time processing clearly deficient applications at the expense 
of delaying action on other applications.\118\ Consistent with this 
longstanding policy, if the Staff issues comments on an application and 
the next amendment filed is not responsive to those comments, the Staff 
will repeat such comments, direct the applicant to explain why the 
comments were not addressed, or potentially recommend that the 
Commission deny the application.
---------------------------------------------------------------------------

    \118\ See Commission Policy and Guidelines for Filing of 
Applications for Exemption, Investment Company Act Release No. 14492 
(Apr. 30, 1985).
---------------------------------------------------------------------------

    Finally, we do not support imposing specific requirements for 
communication between the Staff and applicants. At the outset of each 
review, the Staff provides applicants with the contact information for 
the Staff. Our Staff is always available to applicants and, in fact, 
applicants frequently contact the Staff to inquire about their 
application's current status. We also do not believe the Staff should 
be required to notify applicants if the Division shares their 
application with another Commission division, because such 
communications may involve nonpublic internal deliberations. 
Accordingly, we do not believe that communication schedules fixed by 
rule are needed to foster more effective communication.

C. Applications Deemed Withdrawn Under the Standard Review Process

    The Commission is also amending rule 0-5 to deem an application 
withdrawn if the applicant does not respond in writing to Staff 
comments. Deeming inactive applications withdrawn will both assist us 
in maintaining a clear record of pending applications, as well as 
provide the public, including potential new applicants, with a better 
sense of the applications that the Commission is actively considering 
at any given time.
    Rule 0-5(g) provides that, if an applicant has not responded in 
writing to a request for clarification or modification of an 
application filed under this section within 120 days after

[[Page 57099]]

the request, the application will be deemed withdrawn.\119\ The 
withdrawal will be without prejudice and the applicant would be free to 
refile, however the timeline would restart with the new 
application.\120\
---------------------------------------------------------------------------

    \119\ An application requesting expedited review will not be 
subject to this withdrawal provision because under rule 0-
5(f)(2)(iii), it will be deemed withdrawn if the applicant has not 
filed an amendment responsive to a Staff request for modifications 
within 30 days.
     An applicant can request to withdraw an application with a 
letter filed as form APP-WD on EDGAR, with the corresponding 
permission being filed as form APP-WDG on EDGAR. The Staff will 
reflect that an application is deemed withdrawn under rule 0-5(g) by 
uploading a form APP-WDG on EDGAR, without need for any action by 
the applicant. The Staff intends to reflect the withdrawal by 
uploading the form APP-WDG generally within 30 days after the end of 
the 30-day period for expedited applications and the 120-day period 
for other applications.
    \120\ Under rule 17 CFR 203.13, the 90-day timeline for Staff 
comments applies to all new applications even if a predecessor 
withdrawn application was subject to the 60-day timeline applicable 
to certain amendments.
---------------------------------------------------------------------------

    One commenter said that it did not have any recommendations 
regarding this aspect of our proposal, but requested clarification of 
how the Staff would treat an application that the Staff requests to be 
withdrawn and an applicant declines to withdraw.\121\ Withdrawals under 
rule 0-5(g) will happen by operation of law. Applicants will not need 
to take any affirmative action to cause the withdrawal.
---------------------------------------------------------------------------

    \121\ See ICI Comment Letter.
---------------------------------------------------------------------------

    Another commenter suggested that applicants be able to request 
extensions to the response period before withdrawal occurs to ensure 
that Staff comments and applicant responses are not made public 
prematurely.\122\ We believe this concern is now moot given we are not 
moving forward at this time with publicly disseminating Staff comments 
on applications, and responses to those comments, as discussed 
below.\123\
---------------------------------------------------------------------------

    \122\ See SIFMA AMG Comment Letter.
    \123\ See infra, discussion in Section II.D.
---------------------------------------------------------------------------

D. Release of Comments on Applications and Responses

    Finally, in our proposal we announced our intention to begin to 
disseminate publicly Staff comments on applications, and responses to 
those comments and stated that we believed it would improve the 
transparency of the application process.
    Most commenters recommended against public dissemination of Staff 
comments and responses, expressing a number of concerns.\124\ First, 
they argued that public dissemination would discourage innovation in 
the fund industry and thwart open dialogue between applicants and the 
Staff.\125\ The commenters noted that applications may present novel 
ideas and explained that initial applicants would become reluctant to 
share proprietary information with the Staff regarding these ideas, 
given that dissemination of such information could provide competitive 
advantages to third parties.\126\ Second, commenters believe that 
public dissemination may also lead to increased confidential treatment 
requests for materials filed in connection with applications, thus 
substantially increasing the administrative burden on applicants and 
the Staff.\127\ Further, to avoid the dissemination of information, 
applicants may choose to communicate with the Staff orally rather than 
in writing, which would make communications with the Staff less 
effective in sharing relevant information.\128\ Consequently, the 
commenters believe that public dissemination of comments and responses 
to those comments would generally increase burdens on applicants and 
the Staff and make the application process less efficient.\129\
---------------------------------------------------------------------------

    \124\ See ICI Comment Letter; IAA Comment Letter; Fidelity 
Comment Letter; SIFMA AMG Comment Letter; Stradley Comment Letter.
    \125\ See ICI Comment Letter; SIFMA AMG Comment Letter; Stradley 
Comment Letter.
    \126\ See ICI Comment Letter.
    \127\ See ICI Comment Letter; IAA Comment Letter; Fidelity 
Comment Letter; SIFMA AMG Comment Letter; Stradley Comment Letter.
    \128\ See ICI Comment Letter; SIFMA AMG Comment Letter.
    \129\ See ICI Comment Letter; Fidelity Comment Letter; Stradley 
Comment Letter.
---------------------------------------------------------------------------

    Third, commenters opposing public dissemination noted that 
information disclosed would be of little utility to investors, given it 
is not the type of information relevant to investment decisions.\130\ 
The commenters were also concerned that the information may be 
confusing to the public given that written correspondence from various 
stages in the review of an application may present an incomplete 
picture of the review process and the resolution of the relevant 
issues.\131\
---------------------------------------------------------------------------

    \130\ See ICI comment letter; Fidelity Comment Letter; SIFMA AMG 
Comment Letter.
    \131\ See Stradley Comment Letter. See also Fidelity Comment 
Letter.
---------------------------------------------------------------------------

    Some commenters also distinguished the applications process from 
the review of disclosure filings, for which the Staff currently 
publicly disseminates comments.\132\ In particular, the commenters 
noted that certain registration statement amendments can become 
effective automatically, and thus there may be benefit to publishing 
comments because there would be no other public record.\133\ 
Conversely, applications do not have automatic effectiveness; 
applicants file and amend an application publicly, and such amended 
application, together with the Commission notice of an application, 
provide a fulsome record of the issues considered during the 
application's review.\134\
---------------------------------------------------------------------------

    \132\ In our proposal, we noted that dissemination of comments 
on applications and responses to those comments would follow a 
process similar to the process that the Division of Investment 
Management's Disclosure Review and Accounting Office uses to 
publicly disseminate comment letters and responses on disclosure 
filings.
    \133\ See ICI Comment Letter.
    \134\ See ICI Comment Letter; Stradley Comment Letter.
---------------------------------------------------------------------------

    However, some commenters supported public dissemination of comments 
and responses to comments. Those commenters believed that it would be 
beneficial for future applicants to be able to review the Staff's 
comments and applicants' responses, enhancing transparency.\135\
---------------------------------------------------------------------------

    \135\ See Capital Group Comment Letter. See also Ed Snoke 
Comment Letter and Diane Smith Comment Letter (suggesting release of 
comments at the time of the notice to help for the basis for any 
hearing request on the application). We note that the publicly 
available application as well as the Commission notice of the 
application provide the public with the relevant information on 
which to base a hearing request.
---------------------------------------------------------------------------

    While the Commission plans to continue to consider publicly 
disseminating Staff comments and response to those comments, the 
comment letters discussed above raised issues with respect to this 
proposal that merit further consideration. Accordingly, comments and 
responses will not be disseminated at this time.

E. Other Matters

    Pursuant to the Congressional Review Act,\136\ the Office of 
Information and Regulatory Affairs has designated these amendments as 
not ``a major rule,'' as defined by 5 U.S.C. 804(2). If any of the 
provisions of these rules, or the application thereof to any person or 
circumstance, is held to be invalid, such invalidity shall not affect 
other provisions or application of such provisions to other persons or 
circumstances that can be given effect without the invalid provision or 
application.
---------------------------------------------------------------------------

    \136\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

III. Economic Analysis

A. Introduction

    We are mindful of the costs imposed by, and the benefits obtained 
from, our rules. Section 2(c) of the Act states that when the 
Commission is engaging in rulemaking under the Act and is required to 
consider or determine whether the action is necessary or

[[Page 57100]]

appropriate in (or, with respect to the Act, consistent with) the 
public interest, the Commission shall consider whether the action will 
promote efficiency, competition, and capital formation, in addition to 
the protection of investors. The following analysis considers the 
potential economic effects that may result from amended rule 0-5, 
including the benefits and costs to applicants and other market 
participants as well as the broader implications of the rule for 
efficiency, competition, and capital formation.
    Amended rule 0-5 creates an expedited review process for applicants 
whose application is substantially identical to two previously approved 
precedential applications. The rule further provides that an 
application for relief will be deemed withdrawn if the applicant does 
not respond in writing within 120 days of a request for clarification 
or modification of the application.\137\ Overall, we anticipate that 
these amendments will benefit both applicants and investors by allowing 
eligible applicants to realize the benefits of relief more quickly than 
under the current process, which generally will be shared with fund 
shareholders. Additionally, we expect the amendments to result in cost 
savings associated with the application process, which could be passed 
on to investors. As discussed below, we anticipate that we will receive 
approximately 50 applications per year seeking expedited review under 
the Act.
---------------------------------------------------------------------------

    \137\ See supra footnote 119.
---------------------------------------------------------------------------

    The scope of the benefits and costs of amended rule 0-5 depends on 
the expected volume of applications generally as well as the expected 
volume of applications for expedited review in particular. Those 
benefits and costs also depend on the extent to which applicant 
experience under amended rule 0-5 is expected to differ from current 
experience. Below, we describe the number of applications as well as 
the time the Commission takes in responding to such applications.

B. Economic Baseline

1. Applications for Relief
    The table below reports the number of initial applications by 
category and calendar year for 2017, 2018, and 2019.\138\
---------------------------------------------------------------------------

    \138\ We use a combination of EDGAR and internal data for this 
baseline analysis. The table includes initial applications that were 
initially filed from 2017 to 2019.

----------------------------------------------------------------------------------------------------------------
                     Exemption type \1\                           2017         2018         2019        Total
----------------------------------------------------------------------------------------------------------------
12(d)(3)....................................................            0            1            0            1
Affiliated Sales............................................            2            2            0            4
Business Development Companies..............................            1            2            1            4
Co-Investment...............................................           21           15           14           50
Deregistration..............................................            0            0            1            1
Distributions...............................................            1            4            1            6
Employees Securities Company................................            4            1            2            7
Exchange-Traded Funds.......................................           39           33           22           94
Family Office...............................................            0            1            0            1
Fund of Funds--Multi-Group..................................            9            3            2           14
Inadvertent Investment Companies............................            1            0            0            1
Ineligible--Disqualified Firm...............................            1            1            0            2
Insurance Products..........................................            4            2            1            7
Inter-fund Lending..........................................            5            1            3            9
Interval Funds..............................................            2            0            0            2
Joint Transaction...........................................            0            3            0            3
Multi-Class.................................................           11            9            5           25
Multi-Manager...............................................           14            9            6           29
Other.......................................................            8           10           11           29
Unit Investment Trusts--Other...............................            1            0            1            2
                                                             ---------------------------------------------------
    Total...................................................          124           97           70          291
----------------------------------------------------------------------------------------------------------------
\1\ See U.S. Securities and Exchange Commission, Investment Company Act Notices and Orders: Category Listing,
  available at https://www.sec.gov/rules/icreleases.shtml.

    Among the 291 applications shown in the above table, the largest 
broad categories of applications are applications related to exchange-
traded funds (94, or 32 percent of applications) and applications 
related to co-investment (50, or 17 percent of applications).\139\ 
Together, these two categories of applications make up 144, or 49 
percent of applications from 2017 to 2019.
---------------------------------------------------------------------------

    \139\ The Commission's recent adoption of rule 6c-11 will permit 
exchange-traded funds that satisfy certain conditions to operate 
without obtaining an exemptive order. See supra footnote 24. Also, 
the Commission recently proposed new 17 CFR 270.12d1-4 (rule 12d1-4 
under the Investment Company Act) that would, under specified 
circumstances, permit a fund to acquire shares of another fund in 
excess of the limits of section 12(d)(1) of the Act without 
obtaining an exemptive order from the Commission. See Funds of Funds 
Arrangements, Investment Company Act Release No. 33329 (Dec. 19, 
2018) (84 FR 1286, Feb. 1, 2019).
---------------------------------------------------------------------------

    The table below reports the number of amended filings associated 
with the 291 initial applications from 2017 to 2019, for those initial 
applications that resulted in notices from 2017 to 2019.\140\
---------------------------------------------------------------------------

    \140\ Eighty-nine initial filings did not result in a notice 
before December 31, 2019. Because the table provides information on 
the number of amended filings associated with applications that 
resulted in notices, those 89 initial filings are excluded from the 
sample.

                                            Number of Amended Filings
----------------------------------------------------------------------------------------------------------------
       0                1                2               3               4              >4             Total
----------------------------------------------------------------------------------------------------------------
           42               90              39              17               9               5             202
----------------------------------------------------------------------------------------------------------------


[[Page 57101]]

    Of the 202 applications from 2017 to 2019, 42 (21 percent) initial 
applications resulted in a notice without any amendment. Ninety (45 
percent) applications resulted in a notice after one amendment to the 
initial application. Overall, 70 (35 percent) initial applications 
required two or more amended applications prior to receiving a notice.
2. Review Process
    The current rules governing applications for exemption serve as a 
baseline against which we assess the economic impacts of amended rule 
0-5. At present, there are no rules under the Act or other rules 
governing timeframes for Commission consideration of applications for 
exemption. While rules governing timeframes for the consideration of 
applications for exemption have not been formalized, in 2008 the Staff 
adopted the performance target of providing comments on at least 80 
percent of initial applications within 120 days after their 
receipt.\141\ For filings made on or after June 1, 2019, the Division 
has now implemented a new internal target of providing comments on both 
initial applications and amendments within 90 days.
---------------------------------------------------------------------------

    \141\ See supra footnote 31.
---------------------------------------------------------------------------

    The table below summarizes the number of days between an 
applicant's initial filing and a response from the Commission from 2017 
to 2019.

----------------------------------------------------------------------------------------------------------------
                      Year                             Mean         % <=45 days     % <=90 days    % <=120 days
----------------------------------------------------------------------------------------------------------------
2017............................................              85             16%             46%             98%
2018............................................              95              10              37              91
2019............................................              66              30              84             100
Overall.........................................              84              18              52              96
----------------------------------------------------------------------------------------------------------------

    We note that the prolonged Government shutdown from December 22, 
2018 to January 25, 2019 (35 days) affected turnaround times for those 
applications initially submitted in the latter portion of 2018, as the 
Staff was not able to review and process applications during that time. 
Overall, from 2017 through 2019, 18 percent of applicants experienced 
times between initial filing and a response from the Commission of 45 
days or less. Fifty-two percent of applicants experienced times of 90 
days or less, and 96 percent of applicants experienced times of 120 
days or less.

C. Benefits and Costs of Amended Rule 0-5

    We are adopting an expedited review process for routine 
applications and a new rule to deem an application for expedited 
exemptive relief withdrawn when an applicant fails to respond to Staff 
comments. These actions could have both direct as well as indirect 
effects. Because the actions affect the application process, the 
actions could affect both applicants and the Commission. Further, to 
the extent the actions have a direct effect on the Commission, there 
could arise an indirect effect on applicants as well as investors. 
These potential direct and indirect effects are discussed in the 
context of benefits and costs of the rule described below.
    The magnitude of these estimated expected effects will depend, at 
least in part, on the extent to which anticipated outcomes differ from 
the baseline. For example, as noted above, we calculate that in recent 
years 18 percent of initial applications have received Commission 
response within 45 days.\142\ The expected benefits and costs will 
depend on the extent to which the actions result in outcomes that 
differ from recent experience.\143\
---------------------------------------------------------------------------

    \142\ As discussed above, 52% of initial filings have received 
Commission action within 90 days.
    \143\ The expected benefits and costs will also depend on the 
amount of application activity. Recent Commission rulemaking and 
proposed rules, if adopted, could result in a reduction in the 
number of future applications. See supra footnote 35.
---------------------------------------------------------------------------

1. Benefits
    We expect that the adopted expedited review process will have the 
direct effect of allowing the benefits of relief to be realized by 
applicants more quickly than otherwise would be the case. Further, we 
expect that the adopted expedited review procedure will make the 
application process less expensive. For example, we believe that for 
applications that seek relief substantively identical to relief that 
the Commission has recently granted the new procedure will encourage 
applicants to submit applications that are substantially identical to 
precedent. Submitting applications that are substantially identical to 
precedent should reduce the cost of drafting applications as well as 
reduce costs associated with needing to file multiple amendments.
    We estimate that the expedited review process will significantly 
reduce costs for applicants compared to applicants receiving orders 
under standard review. We believe the estimated total cost burden per 
application for applicants to receive an order for an average 
application under standard review utilizing outside counsel is 
approximately $74,550 \144\ and the estimated hour or cost burden per 
application for applicants utilizing in-house counsel will be 
approximately 150 hours or $58,800.\145\ The Staff estimates that the 
total cost burden per application for applicants to receive an order 
for an application under the adopted expedited review utilizing outside 
counsel is approximately $14,910 \146\ and the estimated hour or cost 
burden per application for applicants utilizing in-house counsel will 
be approximately 30 hours or $11,760.\147\ Therefore, the estimated 
costs for an application under the expedited review process equate to 
an 80 percent savings compared to the estimated costs for an average 
application under the standard review process.
---------------------------------------------------------------------------

    \144\ This estimate is based on the following calculations: $497 
(hourly rate for outside counsel) x 150 (estimated hours to receive 
an order for an application under standard review) = $74,550.
    \145\ This estimate is based on the following calculations: $392 
(hourly rate for in-house counsel) x 150 (estimated hours to receive 
an order for an application under standard review) = $58,800.
    \146\ This estimate is based on the following calculations: $497 
(hourly rate for outside counsel) x 30 (estimated hours to receive 
an order for an application under expedited review) = $14,910.
    \147\ This estimate is based on the following calculations: $392 
(hourly rate for in-house counsel) x 30 (estimated hours to receive 
an order for an application under expedited review) = $11,760.
---------------------------------------------------------------------------

    The estimated savings for an application under expedited review 
compared to an average application under the standard review process 
would be approximately $59,640 \148\ per application utilizing outside 
counsel or

[[Page 57102]]

120 hours \149\ or $47,040 \150\ per application utilizing in-house 
counsel. Accordingly, the expedited review process would decrease the 
total estimated annual cost burden by approximately $2,385,600 
utilizing outside counsel and total estimated annual hour burden by 
approximately 1,200 hours utilizing in-house counsel.\151\ The total 
estimated annual savings for the expedited review process for both 
outside and in-house counsel would be $2,856,000.\152\ We expect that 
investors in entities utilizing the expedited review process will 
benefit to the extent those cost savings are passed along.
---------------------------------------------------------------------------

    \148\ This estimate is based on the following calculations: 
$74,550 (estimated total cost under standard review utilizing 
outside counsel) - $14,910 (estimated total cost under expedited 
review utilizing outside counsel) = $59,640.
    \149\ This estimate is based on the following calculations: 150 
(estimated total hours under standard review utilizing in-house 
counsel) - 30 (estimated total hours under expedited review 
utilizing in-house counsel) = 120.
    \150\ This estimate is based on the following calculations: 
$58,800 (estimated total cost under standard review utilizing in-
house counsel) - $11,760 (estimated total cost under expedited 
review utilizing in-house counsel) = $47,040.
    \151\ This estimate is based on the following calculations:
    $59,640 (estimated savings per application under expedited 
review) x 50 (estimated number of applications under expedited 
review, see infra footnote 182) x 0.80 (approximate percentage of 
applications prepared by outside counsel) = $2,385,600.
    120 (estimated hours saved per application under expedited 
review) x 50 (estimated number of applications under expedited 
review, see infra footnote 182) x 0.20 (approximate percentage of 
applications prepared by in-house counsel) = 1,200.
    \152\ This estimate is based on the following calculations: 
$2,385,600 (estimated total cost savings utilizing outside counsel) 
+ [1,200 (estimated total hours saved utilizing in-house counsel) x 
$392 (hourly rate for in-house counsel)] = $2,856,000. This estimate 
takes into account the incremental costs of the expedited review 
requirements.
---------------------------------------------------------------------------

    We expect that the adopted actions will also have a direct effect 
on the Commission. As discussed in Section I.C above, a significant 
factor affecting the time to review an application is often how the 
application has been drafted. Applications for which there is clear 
precedent often omit standard terms or conditions, or contain 
significantly different versions of the standard terms or 
representations, from the relevant precedent. These variances increase 
the time required for the Staff's review because the Staff must analyze 
the changes to determine whether they alter the scope or nature or 
appropriateness of the requested relief. To the extent the new 
procedure would encourage applicants for expedited review to submit 
applications that are substantially identical to precedent, we expect 
the new procedure to reduce the amount of Staff resources required to 
review such applications.
    The anticipated reduction in Staff resources required to review 
applications could result in indirect effects associated with the 
adopted actions. In particular, to the extent Staff is able to devote 
greater resources to more novel applications, the benefits realized by 
applicants with more novel applications may be realized more quickly 
than otherwise would be the case. To the extent those benefits are 
passed along to investors, investors would experience indirect benefits 
as well. Additionally, to the extent these indirect benefits accrue to 
applicants with more novel applications, the adopted actions could 
foster the submission of a greater number of novel applications which 
could lead to greater innovation in investment products. Further, the 
adopted actions could benefit investors by enhancing competition among 
market participants, which we discuss in more detail below.
2. Costs
    Adopted rule 0-5(d) creates the opportunity for applicants whose 
applications meet certain requirements to request expedited review 
subject to the requirements of adopted rules 0-5(d) and 0-5(e). The 
adopted amendment to rule 0-5 does not require potential applicants to 
request expedited review. Potential applicants for expedited review, 
then, would only bear the costs of requesting expedited review in those 
circumstances where the applicant believes the benefits justify the 
costs.
    With respect to applications for expedited review, amended rule 0-
5(e)(2) requires applicants to submit exhibits with marked copies of 
the application showing changes from the final versions of the two 
precedent applications. Based on interactions with applicants and Staff 
experience, for those applicants relying on outside counsel to prepare 
two marked copies against two recent precedents, the estimated cost is 
$2,485 per application.\153\ Applicants utilizing in-house counsel to 
provide two marked copies against two recent precedents would spend 5 
hours or $1,960 per application.\154\
---------------------------------------------------------------------------

    \153\ See infra footnote 186.
    \154\ See infra footnote 179.
---------------------------------------------------------------------------

    Amended rule 0-5(e)(1) requires that the cover page of the 
application include a notation prominently stating ``EXPEDITED REVIEW 
REQUESTED UNDER 17 CFR 270.0-5(d).'' Amended rule 0-5(e)(3) further 
requires the accompanying cover letter to certify on behalf of the 
applicant that the applicant believes the application meets the 
requirements of rule 0-5(d), and that the marked copies required by 
rule 0-5(e)(2) are complete and accurate with an explanation on why the 
particular precedents were chosen. The written certification is similar 
to the representation required from counsel under 17 CFR 280.485 (rule 
485) for post-effective amendments filed by certain registered 
investment companies.\155\ Such a representation would be subject to 
section 34(b) of the Act.\156\ Based on conversations with applicants 
and Staff experience, we expect the cost of these cover letter 
requirements to be $994 per application utilizing outside counsel \157\ 
and 2 hours or $784 per application utilizing in-house counsel.\158\
---------------------------------------------------------------------------

    \155\ See rule 485(b)(4).
    \156\ See supra footnote 78.
    \157\ See infra footnote 186.
    \158\ See infra footnote 183.
---------------------------------------------------------------------------

    We estimate we will receive approximately 50 applications \159\ per 
year seeking expedited review under the Act. Therefore, we estimate 
that the new requirements will impose a total annual cost burden of 
approximately $139,160 utilizing outside counsel \160\ and total annual 
hour burden of approximately 70 hours utilizing in-house counsel \161\ 
for a cost burden of $27,440.\162\ The total estimated annual cost 
burden for all applicants expected to seek expedited review, reflecting 
the use of both outside and in-house counsel, would be $166,600.\163\
---------------------------------------------------------------------------

    \159\ See infra footnote 176.
    \160\ See infra footnote 187.
    \161\ See infra footnote 180.
    \162\ See infra footnote 181.
    \163\ $166,600 = $139,160 (cost of utilizing outside counsel) + 
$27,440 (cost of utilizing in-house counsel).
---------------------------------------------------------------------------

    Amended rule 0-5 also provides that, with respect to expedited 
reviews, if applicants do not file an amendment responsive to Staff's 
requests for modification within 30 days of receiving such requests, 
including a marked PDF copy showing any changes made and a 
certification that such marked copy is accurate and complete, the 
application will be deemed withdrawn. We believe the cost of complying 
with the 30-day requirement would be the same as complying with the 
current 60-day requirement.\164\ We assume that those applicants 
requesting expedited review would likely bear an opportunity cost the 
longer the application process is delayed. Applicants for expedited 
review, then, will benefit from responding to Staff requests for 
modification in a more timely manner than they would under the current 
requirement.
---------------------------------------------------------------------------

    \164\ In the past, Staff placed an application on inactive 
status when an applicant did not respond to comments within 60 days. 
See supra footnote 19.

---------------------------------------------------------------------------

[[Page 57103]]

    Adopted rule 0-5(g) additionally provides that, if an applicant has 
not responded in writing to a request for clarification or modification 
of an application filed under standard review within 120 days after the 
request, the application will be deemed withdrawn. As an oral response 
will not stop an application from being deemed withdrawn, the ``in 
writing'' requirement will create an additional cost. We believe the 
``in writing'' requirement will increase the burden by $994 per 
application for applicants relying on outside counsel.\165\ Applicants 
utilizing in-house counsel would spend 2 hours or $784 per 
application.\166\ We estimate we will receive approximately 90 
applications \167\ seeking standard review under the Act annually and 
of those 90 applications, we estimate that approximately 10 percent 
will result in applicants responding ``in writing'' to avoid the 
application's deemed withdrawal pursuant to rule 0-5(g). Therefore, the 
``in writing'' requirement under rule 0-5(g) would increase the total 
estimated annual cost burden by approximately $7,157 utilizing outside 
counsel \168\ and total estimated annual hour burden by approximately 
3.6 hours utilizing in-house counsel \169\ for an estimated cost burden 
of $1,411.\170\ The total estimated annual cost burden for both outside 
and in-house counsel would be $8,568.\171\
---------------------------------------------------------------------------

    \165\ See infra footnote 188.
    \166\ See infra footnote 183.
    \167\ See infra footnote 182.
    \168\ See infra footnote 189.
    \169\ See infra footnote 184.
    \170\ See infra Section IV, PRA Table 1.
    \171\ $8,568 = $7,157 (cost of utilizing outside counsel) + 
$1,411 (cost of utilizing in-house counsel).
---------------------------------------------------------------------------

D. Effects on Efficiency, Competition, and Capital Formation

    This section evaluates the impact of adopted amendments to rule 0-5 
on efficiency, competition, and capital formation.
    Efficiency. We expect the expedited review process to benefit 
potential applicants directly by providing them an opportunity, subject 
to certain conditions, for expedited exemptive relief. Further, to the 
extent the adopted rule encourages applications that are substantially 
identical to precedent, we expect the adopted rule should reduce the 
likelihood of applicants needing to file amendments. To the extent the 
expedited review process allows applicants to realize the benefits of 
relief more quickly and with fewer filings, we would expect the 
operating efficiency of applicants to increase more quickly and to do 
so with a greater net benefit than under the existing application 
process.
    As discussed above, applications for which there is clear precedent 
often omit standard terms or conditions, or contain significantly 
different versions of the standard terms or representations, from the 
relevant precedent. As a result, the Staff requires increased time and 
resources to review the changes to determine whether they alter the 
scope or nature of the requested relief. To the extent the new 
procedures would encourage applicants for expedited review to submit 
applications that are substantially identical to precedent, we expect 
the new procedures to reduce the amount of Staff resources required to 
review such applications and increase Staff resources available to 
review more novel applications. As a result, the benefits of any 
innovative features and new product types associated with novel 
applications could be realized by investors more quickly, thereby 
increasing investment efficiency (that is, the ability of investors to 
find and invest in funds that meet their particular needs or 
strategies) more quickly than under the current process.
    Competition. The adopted rule would likely increase competition in 
those situations where applicants would meet the requirements for 
expedited review. The effect on competition is expected to operate 
through two channels. The first channel would be the speed with which 
potential competitors could realize the benefits of relief. The 
expedited review process would allow applicants to compete more quickly 
with prior applicants who already realized those benefits.\172\ Second, 
to the extent the adopted expedited review process reduces the cost of 
applying for exemptive relief, the cost reduction would lower barriers 
to competing with those applicants who have already been granted 
relief.
---------------------------------------------------------------------------

    \172\ To the extent the adopted expedited review process will 
allow subsequent applicants to compete more quickly, benefits to 
``first-movers'' (i.e., prior applicants, including the two relied 
on as precedent) may be reduced. We would expect any resulting 
effect on innovation to be minimal. In general, we anticipate that 
the expected gains from innovation will justify the expected loss in 
benefits associated with quicker competition.
---------------------------------------------------------------------------

    Capital Formation. The adopted rule may lead to increased capital 
formation. As discussed above, to the extent the expedited review 
process allows applicants to realize the benefits of relief both more 
quickly and at a lower cost, we would expect the efficiency of the 
application process to increase, allowing more investor money to be 
used productively. The increased efficiency could also lead to more 
applications, including more novel applications. To the extent this 
results in a broader range of investment products, some investors may 
find new investment opportunities that more closely match their 
investment goals. This could induce these investors to invest 
additional money, increasing demand for intermediated assets as a whole 
and, as a result, facilitating capital formation.
    Also, to the extent the new procedures would encourage applicants 
for expedited review to submit applications that are substantially 
identical to precedent, we expect the new procedures to reduce the 
amount of Staff resources required to review such applications and 
increase Staff resources available to review more novel applications. 
An increase in Staff resources available to review more novel 
applications could, in turn, lead to more applicants who would 
implement innovative features or create new types of products. To the 
extent investors do not substitute one type of product or feature for 
another and find new products and features valuable, an increase in the 
number of applications involving innovative features or new types of 
products, could increase the overall amount of resources investors are 
willing to invest and, as a result, facilitate capital formation.

E. Reasonable Alternatives

    Rule 0-5(d)(1) provides that an applicant may request expedited 
review if the application is substantially identical to two other 
applications for which an order granting the requested relief was 
issued. As alternatives, the rule could require a single precedent or 
more than two precedents. Our decision to require two precedent 
applications reflects a balancing of the accessibility to the expedited 
review process and the likely need for additional consideration by the 
Staff. Increasing the number of required precedents would decrease the 
likelihood of additional Staff consideration, but it would likely 
reduce the number of potential applicants qualifying for expedited 
review. For example, if we were to require three precedent applications 
rather than two, the third application, which would qualify for 
expedited review under the adopted amendment to rule 0-5, would no 
longer be eligible for expedited review. Increasing the number of 
required precedents would also likely lengthen the amount of time 
before applicants could request expedited exemptive relief. For 
example, if we were to require three precedent applications rather than 
two,

[[Page 57104]]

to the extent precedent applications do not occur at the same time, 
applicants would have to wait for a third precedent application rather 
than being able to apply for expedited review after the second 
substantially identical application. Conversely, decreasing the number 
of required precedents would likely increase the number of potential 
applicants qualifying for expedited review, but it would increase the 
likelihood for additional Staff consideration. We believe the 
requirement of two precedent applications strikes an appropriate 
balance between those two competing considerations.
    Further, the adopted rule requires the two precedent applications 
to have been filed within the past three years. Our decision to require 
precedents that have been filed over the past three years reflects a 
balancing of the accessibility to the expedited review process and the 
Staff resources required to review whether the terms and conditions of 
an application are still appropriate. Increasing the timeframe to 
greater than three years could increase the number of applicants 
qualifying for expedited review, but also increase Staff resources 
required to review whether the terms and conditions of an application 
are still appropriate. Conversely, shortening the timeframe to less 
than three years would reduce the amount of Staff resources required to 
review whether the terms and conditions of an application are still 
appropriate, but likely reduce the number of potential applicants who 
could qualify for expedited review. We believe the three year 
requirement strikes an appropriate balance between those two competing 
considerations.
    Also, the adopted rule could require a broader standard than the 
``substantially identical'' standard. The adopted rule creates a new 
process that we expect will be both faster and more certain in its 
timing than the current process, while increasing the Staff resources 
available to evaluate applications that may raise novel issues. 
Modifying the standard to permit more extensive differences from 
precedent applications would increase the number of potential 
applicants qualifying for expedited review, but would increase the 
proportion of Staff resources required to inquire about and consider 
the nature of these differences. Additionally, permitting more 
extensive differences from precedent would likely lead the Staff to 
issue more comments in the expedited process and/or transfer a greater 
number of applications to the standard process compared to the adopted 
standard, which could significantly impair our ability to achieve the 
objectives of the expedited process. We believe the substantially 
identical standard strikes an appropriate balance between those two 
competing considerations.

IV. Paperwork Reduction Act

    The new rule amendments under the Act contain ``collections of 
information'' within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\173\ The title for the new collection of information is 
``Rule 0-5 under the Investment Company Act, Procedure with Respect to 
Applications and Other Matters.'' \174\ The Commission is submitting 
these collections of information to the OMB for review in accordance 
with 44 U.S.C. 3507 (d) and 5 CFR 1320.11. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid control number. The 
new rules are designed to expedite the review process of routine 
applications. We discuss below the mandatory collection of information 
burdens associated with the amendments to rules 0-5(e) and 0-5(g).\175\
---------------------------------------------------------------------------

    \173\ 44 U.S.C. 3501 through 3521.
    \174\ The collection of information burden within the meaning of 
the PRA for the general requirements of applications is under rule 
0-2.
    \175\ Responses to this collection of information will not be 
kept confidential.
---------------------------------------------------------------------------

A. Burden of Information Collection

    Rule 0-5(e) requires applicants seeking expedited review to include 
certain information with the application. Rule 0-5(e)(1) requires that 
the cover page of the application include a notation prominently 
stating ``EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-5(d).'' Rule 0-
5(e)(2) requires applicants to submit exhibits with marked copies of 
the application showing changes from the final versions of two 
precedent applications identified as substantially identical. Rule 0-
5(e)(3) requires an accompanying cover letter, signed, on behalf of the 
applicant, by the person executing the application (i) identifying two 
substantially identical applications and explaining why the applicant 
chose those particular applications, and if more recent applications of 
the same type have been approved, why the applications chosen, rather 
than the more recent applications, are appropriate; and (ii) certifying 
that the applicant believes the application meets the requirements of 
rule 0-5(d) and that the marked copies required by rule 0-5(e)(2) are 
complete and accurate.
    Applicants for orders under the Act can include investment 
companies and affiliated persons of investment companies. Applicants 
file applications as they deem necessary. The Commission receives 
approximately 140 applications per year under the Act, and of the 140 
applications, we estimate that we will receive approximately 50 
applications \176\ seeking expedited review under the Act.\177\ 
Although each application is typically submitted on behalf of multiple 
entities, the entities in the vast majority of cases are related 
companies and are treated as a single applicant for purposes of this 
analysis. Each application subject to rules 0-5(e) and 0-5(g) does not 
impose any ongoing obligations or burdens on the applicant.
---------------------------------------------------------------------------

    \176\ This estimate takes into account the recent codification 
of certain ETF Exemptive Orders. See supra footnote 24.
    \177\ Like section III above, this section only relates to 
applications seeking expedited review.
---------------------------------------------------------------------------

    Much of the work of preparing an application is performed by 
outside counsel. Based on conversations with applicants and Staff 
experience, only approximately 20 percent of applications are prepared 
by in-house counsel.
    The new mandatory requirements under rule 0-5(e) would increase the 
estimated hour or cost burden for applicants utilizing in-house counsel 
by 7 hours \178\ or $2,744 \179\ per application. Therefore, the new 
mandatory requirements under rule 0-5(e) would increase the total 
estimated annual hour burden by approximately 70 hours utilizing in-
house counsel.\180\ The total estimated annual cost burden for

[[Page 57105]]

utilizing in-house counsel would be $27,440.\181\
---------------------------------------------------------------------------

    \178\ This estimate is based on the following calculation: 5 
hours (estimated hours per application to prepare the marked copies) 
+ 2 hours (estimated hours per application to explain, notate, and 
certify) = 7 hours.
    \179\ This estimate is based on the following calculation:
    5 (estimated hours per application to prepare the marked copies) 
x $392 (hourly rate for an in-house counsel) = $1,960.
    2 (estimated hours per application to explain, notate, and 
certify) x $392 (hourly rate for an in-house counsel) = $784.
    $1,960 (estimated cost per application to prepare the marked 
copies) + $784 (estimated cost per application to explain, notate, 
and certify) = $2,744.
    The hourly wages data is from the Securities Industry Financial 
Markets Association's Management & Professional Earnings in the 
Securities Industry 2013, modified by Commission Staff to account 
for an 1,800-hour work-year and inflation, and multiplied by 5.35 
(professionals) to account for bonuses, firm size, employee 
benefits, and overhead, suggests that the cost for in-house counsel 
is $392 per hour.
    \180\ This estimate is based on the following calculations:
    [5 (estimated hours per application to prepare the marked 
copies) + 2 (estimated hour per application to explain, notate, and 
certify)] x 50 (estimated number of applications under expedited 
review) x 0.20 (approximate percentage of applications prepared by 
in-house counsel) = 70.
    \181\ This estimate is based on the following calculation: 70 
(estimated total hours utilizing in-house counsel) x $392 (hourly 
rate for an in-house counsel) = $27,440.
---------------------------------------------------------------------------

    Rule 0-5(g) would provide that, if an applicant has not responded 
in writing to a request for clarification or modification of an 
application filed under standard review within 120 days after the 
request, the application will be deemed withdrawn. As an oral response 
would not stop an application from being deemed withdrawn, rule 0-5(g), 
would require applicants to respond ``in writing'' and therefore create 
an additional cost within the meaning of the PRA.
    We estimate that we will receive approximately 90 applications 
\182\ per year seeking standard review under the Act and of the 90 
applications, we estimate that approximately 10 percent will result in 
applicants responding ``in writing'' to avoid the application's deemed 
withdrawal pursuant to rule 0-5(g). We believe the ``in writing'' 
requirement under rule 0-5(g) would increase the burden for applicants 
utilizing in-house counsel by 2 hours or $784 per application.\183\ 
Therefore, the ``in writing'' requirement under rule 0-5(g) would 
increase the total estimated annual hour burden by approximately 3.6 
hours utilizing in-house counsel.\184\ The total estimated annual cost 
burden utilizing in-house counsel would be $1,411.20.\185\
---------------------------------------------------------------------------

    \182\ This estimate is based on the following calculation: 140 
(estimated number of all applications) - 50 (estimated number of 
applications under expedited review) = 90.
    \183\ This estimate is based on the following calculation: 2 
(estimated hours to prepare ``in writing'' response) x $392 (hourly 
rate for an in-house counsel) = $784.
    \184\ This estimate is based on the following calculations:
    2 (estimated hours to prepare ``in writing'' response) x 90 
(estimated number of applications under standard review) x 0.10 
(approximate percentage of applications required to respond ``in 
writing'') x 0.20 (approximate percentage of applications prepared 
by in-house counsel) = 3.6.
    \185\ This estimate is based on the following calculation: 3.6 
(estimated total hours utilizing in-house counsel) x $392 (hourly 
rate for an in-house counsel) = $1,411.20.
---------------------------------------------------------------------------

B. Cost to Respondents

    As discussed above, much of the work of preparing an application is 
performed by outside counsel. Based on conversations with applicants 
and Staff experience, approximately 80 percent of applications are 
prepared by outside counsel.
    Therefore, the new mandatory requirements under rule 0-5(e) would 
increase the estimated cost and administrative burdens for applicants 
utilizing outside counsel by $3,479 \186\ per application and the total 
estimated annual cost burden by approximately $139,160 utilizing 
outside counsel.\187\
---------------------------------------------------------------------------

    \186\ This estimate is based on the following calculation:
    5 (estimated hours to prepare the marked copies) x $497 (hourly 
rate for an attorney) = $2,485.
    2 (estimated hours per application to explain, notate, and 
certify) x $497 (hourly rate for an attorney) = $994.
    $2,485 (estimated cost per application to prepare the marked 
copies) + $994 (estimated cost per application to explain, notate, 
and certify) = $3,479.
    The hourly wages data is from the Securities Industry Financial 
Markets Association's Management & Professional Earnings in the 
Securities Industry 2013, modified by Commission Staff to account 
for an 1,800-hour work-year and inflation, and multiplied by 5.35 
(professionals) to account for bonuses, firm size, employee 
benefits, and overhead, suggests that the cost for outside counsel 
is $497 per hour.
    \187\ This estimate is based on the following calculations:
    [$2,485 (estimated cost per application to prepare the marked 
copies) + $994 (estimated cost per application to explain, notate, 
and certify] x 50 (estimated number of applications under expedited 
review) x 0.80 (approximate percentage of applications prepared by 
outside counsel) = $139,160.
---------------------------------------------------------------------------

    We believe the ``in writing'' requirement would increase the burden 
by $994 per application for applicants relying on outside counsel.\188\ 
Therefore, the ``in writing'' requirement under rule 0-5(g) would 
increase the total estimated annual cost burden by approximately $7,157 
utilizing outside counsel.\189\
---------------------------------------------------------------------------

    \188\ This estimate is based on the following calculation: 2 
(estimated hours to prepare ``in writing'' response) x $497 (hourly 
rate for outside counsel) = $994.
    \189\ This estimate is based on the following calculations:
    $994 (estimated cost per application to prepare ``in writing'' 
response) x 90 (estimated number of applications under standard 
review) x 0.10 (approximate percentage of applications required to 
respond ``in writing'') x 0.80 (approximate percentage of 
applications prepared by outside counsel) = $7,157.
---------------------------------------------------------------------------

    The estimate of annual cost burden is made solely for the purposes 
of the Paperwork Reduction Act, and is not derived from a comprehensive 
or even representative survey or study of the costs of Commission rules 
and forms.
    The following table summarizes the estimated effects and external 
costs of the paperwork burden associated with the amendments to rules 
0-5(e) and 0-5(g).

               PRA Table 1--Estimated Paperwork Burden Increase and Total Costs of the Amendments
----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                                                                      annual       Burden hours    Annual burden
                                                                     responses     per response        costs
----------------------------------------------------------------------------------------------------------------
Rule 0-5(e).....................................................          50 \1\               7    \2\ $166,660
Rule 0-5(g).....................................................           9 \3\               2       \4\ 8,568
                                                                 -----------------------------------------------
    Totals......................................................              59               9         175,168
----------------------------------------------------------------------------------------------------------------
\1\ This estimate is based on the following calculations: [50 (estimated number of applications under expedited
  review) x 0.80 (approximate percentage of applications prepared by outside counsel)] + [50 (estimated number
  of applications under expedited review) x 0.20 (approximate percentage of applications prepared by in-house
  counsel)] = 50.
\2\ $166,600 = $139,160 (estimated cost of utilizing outside counsel) + $27,440 (estimated cost of utilizing in-
  house counsel).
\3\ This estimate is based on the following calculations: [90 (estimated number of applications under standard
  review) x 0.10 (approximate percentage of applications required to respond ``in writing'') x 0.80 (approximate
  percentage of applications prepared by outside counsel)] + [90 (estimated number of applications under
  standard review) x 0.10 (approximate percentage of applications required to respond ``in writing'') x 0.20
  (approximate percentage of applications prepared by in-house counsel)] = 9.
\4\ $8,568 = $7,157 (estimated cost of utilizing outside counsel) + $1,411 (estimated cost of utilizing in-house
  counsel).

V. Final Regulatory Flexibility Analysis

    The Commission has prepared the following Final Regulatory 
Flexibility Analysis (``FRFA'') in accordance with section 3 of the 
Regulatory Flexibility Act (``RFA'') \190\ regarding our amendments to 
rule 0-5 and new rule 17 CFR 202.13.
---------------------------------------------------------------------------

    \190\ See 5 U.S.C. 603.
---------------------------------------------------------------------------

A. Reasons for and Objectives of the Actions

    The application process under the Act has become more important as 
the

[[Page 57106]]

industry has grown and diversified. Granting appropriate exemptions 
from the Act can provide important economic benefits to funds and their 
shareholders, and foster financial innovation. Thus, we have continued 
to consider ways to improve the applications process as we recognize 
the importance of obtaining an order in a timely manner. The new 
amendments and new rule reflect our efforts to improve the process and 
establish an expedited review procedure for applications that are 
substantially identical to recent precedent. We believe that the new 
approach balances applicants' desire for a prompt decision on their 
application with the Commission's need for adequate time to consider 
requests for relief.
    We believe that the new procedure would encourage applicants for 
expedited review to submit applications that are substantially 
identical to precedent, which we expect would facilitate Staff review. 
Accordingly, we should be able to grant relief that meets the 
applicable standards more quickly, and, in turn, devote additional 
resources to the review of more novel requests. A faster application 
process would allow the benefits of relief to be realized by 
applicants, and ultimately by fund shareholders, more quickly than 
otherwise would be the case. Further, we expect that the new expedited 
review procedure will make the applications process less expensive for 
applicants, because we believe that it will reduce the numbers of Staff 
comments.

B. Legal Basis

    The Commission is adopting the rules contained in this document 
under the authority set forth in sections 6(c) and 38(a) of the Act [15 
U.S.C. 80a-6(c) and 80a-37(a)].

C. Small Entities Subject to the Amendment

    Any registered investment company is a small entity if, together 
with other investment companies in the same group of related investment 
companies, it has net assets of $50 million or less as of the end of 
its most recent fiscal year.\191\ Staff estimates that, as of June 
2019, there were 50 open-end funds (including 8 ETFs), 33 closed-end 
funds, and 16 business development companies (BDCs) that would be 
considered small entities that may be subject to amendments to rule 0-
5.\192\
---------------------------------------------------------------------------

    \191\ See 17 CFR 240.0-10 (rule 0-10(a)). Recognizing the growth 
in investment company assets under management since rule 0-10 was 
adopted, the Commission plans to revisit the definition of a small 
investment company for purposes of rule 0-10.
    \192\ This estimate is derived from an analysis of data obtained 
from Morningstar Direct as well as data reported on Form N-SAR filed 
with the Commission for the period ending June 2019.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    Rule 0-5(e) will require applicants seeking expedited review of an 
application to file with the Commission: (1) A cover page of the 
application that states prominently, ``EXPEDITED REVIEW REQUESTED UNDER 
17 CFR 270.0-5(d)''; (2) exhibits with marked copies of the application 
showing changes from the final versions of two precedent applications 
identified as substantially identical; and (3) requires an accompanying 
cover letter, signed, on behalf of the applicant, by the person 
executing the application (i) identifying two substantially identical 
applications and explaining why the applicant chose those particular 
applications, and if more recent applications of the same type have 
been approved, why the applications chosen, rather than the more recent 
applications, are appropriate; and (ii) certifying that the applicant 
believes the application meets the requirements of rule 0-5(d) and that 
the marked copies required by rule 0-5(e)(2) are complete and 
accurate.\193\ As discussed in section IV, the estimated cost and 
administrative burdens for small entities associated with these 
activities for applicants utilizing outside counsel would be $3,479 
\194\ per application and the estimated hour or cost burden for 
applicants utilizing in-house counsel would be 7 hours \195\ or $2,744 
\196\ per application.
---------------------------------------------------------------------------

    \193\ The amendments are discussed in detail in section II.A 
above. We discuss the economic impact, including the estimated 
compliance costs and burdens, of the amendments in section III and 
section IV.
    \194\ This estimate is based on the following calculation: 
$2,485 (estimated cost per application to prepare the marked copies) 
+ $994 (estimated cost per application to explain, notate, and 
certify) = $3,479.
    \195\ This estimate is based on the following calculation: 5 
hours (estimated hours per application to prepare the marked copies) 
+ 2 hours (estimated hours per application to explain, notate, and 
certify) = 7 hours.
    \196\ This estimate is based on the following calculation: 
$1,960 (estimated cost per application to prepare the marked copies) 
+ $784 (estimated cost per application to explain, notate, and 
certify) = $2,744.
---------------------------------------------------------------------------

    As discussed in section III, we believe the additional costs and 
administrative burdens of providing the required statements and 
certifications on the included cover page and submitting two marked 
copies against two precedents would not have a substantial impact on 
the total cost for applications that qualify for the expedited review 
procedure. Small entities will benefit considerably from the expedited 
review procedure as the total estimated savings significantly justify 
the estimated added burden under rule 0-5(e). The estimated savings for 
an application under expedited review compared to an average 
application under the standard review process would be approximately 
$59,640 \197\ per application utilizing outside counsel or 120 hours 
\198\ or $47,040 \199\ per application utilizing in-house counsel.
---------------------------------------------------------------------------

    \197\ See supra footnote 148.
    \198\ See supra footnote 149.
    \199\ See supra footnote 150.
---------------------------------------------------------------------------

    Rule 0-5(g) will require applicants to respond ``in writing'' to a 
request for clarification or modification of an application filed under 
standard review within 120 days after the request from the Staff or the 
application will be deemed withdrawn. As discussed in section IV, the 
estimated cost and administrative burdens for small entities associated 
with these activities for applicants utilizing outside counsel would be 
$994 \200\ per application and the estimated hour or cost burden for 
applicants utilizing in-house counsel would be 2 hours or $784 \201\ 
per application. Rule 0-5(g) imposes additional costs and 
administrative burdens on small entities for standard review 
applications, but the estimated savings from the expedited review 
process justify the added burden of rule 0-5(g).
---------------------------------------------------------------------------

    \200\ See supra footnote 188.
    \201\ See supra footnote 183.
---------------------------------------------------------------------------

    In addition, compliance with the new amendments may require the use 
of professional legal skills necessary for research and preparation of 
required documents. We discuss the economic impact, including the 
estimated costs and burdens, of the new amendments to all registrants, 
including small entities, in sections III and IV above.
    We believe there are no reporting, recordkeeping, or other 
compliance requirements for small entities with respect to rule 17 CFR 
202.13. The new rule is an internal set of deadlines with no costs and 
administrative burdens incurred by the applicants.

E. Duplicative, Overlapping or Conflicting Federal Rules

    The Commission believes that there are no duplicative, overlapping 
or conflicting Federal rules to the amendments to rule 0-5 and rule 17 
CFR 202.13.

F. Significant Alternatives

    The RFA directs the Commission to consider significant alternatives 
that

[[Page 57107]]

would accomplish the stated objectives, while minimizing any 
significant adverse impact on small entities. In connection with the 
adoption, we considered the following alternatives: (i) Establishing 
differing compliance or reporting requirements or timetables that take 
into account the resources available to small entities; (ii) 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for small entities; (iii) the use 
of performance rather than design standards; and (iv) an exemption from 
coverage of the rule, or any part thereof, for such small entities.
    We do not believe that establishing different compliance or 
reporting requirements for small entities would permit us to achieve 
our stated goals. We believe that the new approach is expected to 
reduce costs by shortening the time it takes for applicants to obtain 
orders on certain routine applications. Further clarification, 
consolidation, or simplification of the compliance and reporting 
requirements is not necessary to achieve the goals of the rule and 
would not be appropriate in the public interest and consistent with the 
protection of investors. The use of performance rather than design 
standards is not appropriate, as the new approach is intended to 
expedite the applications process and the use of a single design 
standard would make the procedure more efficient. Exemption from 
coverage of the rule would not be necessary, as the new expedited 
process would further benefit small entities by making the applications 
process more cost efficient.

VI. Statutory Authority

    The Commission is adopting the rules contained in this document 
under the authority set forth in sections 6(c) and 38(a) of the Act [15 
U.S.C. 80a-6(c) and 80a-37(a)].

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies).

17 CFR Part 202

    Administrative practice and procedure, Securities.

17 CFR Part 270

    Investment Companies, Reporting and recordkeeping requirements, 
Securities.

Text of the Amendments

    For the reasons set forth in the preamble, title 17, chapter II of 
the Code of Federal regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

Subpart A--Organization and Program Management

0
1. The general authority citation for part 200, subpart A, continues to 
read as follows:

    Authority:  15 U.S.C. 77c, 77o, 77s, 77z-3, 77sss, 78d, 78d-1, 
78d-2, 78o-4, 78w, 78ll(d), 78mm, 80a-37, 80b-11, 7202, and 7211 et 
seq., unless otherwise noted.
* * * * *

0
2. Amend Sec.  200.30-5 by adding paragraph (a)(9) to read as follows:


Sec.  200.30-5   Delegation of authority to Director of Division of 
Investment Management.

* * * * *
    (a) * * *
    (9) To notify an applicant under 17 CFR 270.0-5(f)(1)(ii) that an 
application pursuant to the Act (15 U.S.C. 80a-1 et seq.) is not 
eligible for expedited review under 17 CFR 270.0-5.
* * * * *

PART 202--INFORMAL AND OTHER PROCEDURES

0
3. The general authority citation for part 202 continues to read as 
follows:

    Authority:  15 U.S.C. 77s, 77t, 77sss, 77uuu, 78d-1, 78u, 78w, 
78ll(d), 80a-37, 80a-41, 80b-9, 80b-11, 7201 et seq., unless 
otherwise noted.
* * * * *

0
4. Add Sec.  202.13 to read as follows:


Sec.  202.13   Informal procedure with respect to applications under 
the Investment Company Act of 1940.

    (a) On any application subject to 17 CFR 270.0-5, other than an 
application eligible for and proceeding under expedited review as 
provided for by 17 CFR 270.0-5(d), (e), and (f), the Division should 
take action within 90 days of the initial filing and each of the first 
three amendments thereto, and within 60 days of any subsequent 
amendment. Such 90- or 60-day period will stop running upon any 
irregular closure of the Commission's Washington, DC office to the 
public for normal business, including, but not limited to, closure due 
to a lapse in Federal appropriations, national emergency, inclement 
weather, or ad hoc Federal holiday, and will resume upon the reopening 
of the Commission's Washington, DC office to the public for normal 
business. The Division may grant 60-day extensions and the applicant 
should be notified of any such extension.
    (b) Action on the application or any amendment thereto shall 
consist of:
    (1) Issuing a notice;
    (2) Providing the applicant with requests for clarification or 
modification of the application; or
    (3) Informing applicant that the application will be forwarded to 
the Commission, in which case the application is no longer subject to 
the provisions set forth in paragraph (a) of this section.
    (c) The provisions of this section, including the timeframes 
provided for in this section, are not intended to create enforceable 
rights by any interested parties and shall not be deemed to do so. 
Rather, this section provides informal non-binding guidelines and 
procedures that the Commission anticipates the Division following.

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
5. The general authority citation for part 270 continues to read as 
follows:

    Authority:  15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39, 
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless 
otherwise noted.
* * * * *

0
6. Amend Sec.  270.0-5 by adding paragraphs (d) through (g) to read as 
follows:


Sec.  270.0-5   Procedure with respect to applications and other 
matters.

* * * * *
    (d)(1) An applicant may request expedited review of an application 
if such 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.
    (2) For purposes of this section, ``substantially identical'' 
applications are applications requesting relief from the same sections 
of the Act and this part, containing identical terms and conditions, 
and differing only with respect to factual differences that are not 
material to the relief requested.
    (e) An application submitted for expedited review must include:
    (1) A notation on the cover page of the application that states 
prominently, ``EXPEDITED REVIEW REQUESTED UNDER 17 CFR 270.0-5(d)'';
    (2) Exhibits with marked copies of the application showing changes 
from the final versions of the two applications identified as 
substantially identical

[[Page 57108]]

under paragraph (e)(3) of this section; and
    (3) An accompanying cover letter, signed, on behalf of the 
applicant, by the person executing the application:
    (i) Identifying two substantially identical applications and 
explaining why the applicant chose those particular applications, and 
if more recent applications of the same type have been approved, why 
the applications chosen, rather than the more recent applications, are 
appropriate; and
    (ii) Certifying that the applicant believes the application meets 
the requirements of paragraph (d) of this section and that the marked 
copies required by paragraph (e)(2) of this section are complete and 
accurate.
    (f)(1) No later than 45 days from the date of filing of an 
application for which expedited review is requested:
    (i) Notice of an application will be issued in accordance with 
paragraph (a) of this section; or
    (ii) The applicant will be notified that the application is not 
eligible for expedited review because it does not meet the criteria set 
forth in paragraph (d) or (e) of this section or because additional 
time is necessary for appropriate consideration of the application.
    (2) For purposes of paragraph (f)(1) of this section:
    (i) The 45-day period will stop running upon:
    (A) Any request for modification of an application and will resume 
running on the 14th day after the applicant has filed an amended 
application responsive to such request, including a marked copy showing 
any changes made and a certification signed by the person executing the 
application that such marked copy is complete and accurate;
    (B) Any unsolicited amendment of the application and will resume 
running on the 30th day after such an amendment, provided that the 
amendment includes a marked copy showing changes made and a 
certification signed by the person executing the application that such 
marked copy is complete and accurate; and
    (C) Any irregular closure of the Commission's Washington, DC office 
to the public for normal business, including, but not limited to, 
closure due to a lapse in Federal appropriations, national emergency, 
inclement weather, or ad hoc Federal holiday, and will resume upon the 
reopening of the Commission's Washington, DC office to the public for 
normal business.
    (ii) If the applicant does not file an amendment responsive to any 
request for modification within 30 days of receiving such request, 
including a marked copy showing any changes made and a certification 
signed by the person executing the application that such marked copy is 
complete and accurate, the application will be deemed withdrawn.
    (g) If an applicant has not responded in writing to any request for 
clarification or modification of an application filed under this 
section, other than an application that is under expedited review under 
paragraphs (d) and (e) of this section, within 120 days after the 
request, the application will be deemed withdrawn.

    By the Commission.

    Dated: July 6, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-14884 Filed 9-14-20; 8:45 am]
BILLING CODE 8011-01-P


