SECURITIES AND EXCHANGE COMMISSION
17 CFR PART 240
Rel. No. 34-39624
COMMISSION PROCEDURES FOR FILING APPLICATIONS FOR ORDERS FOR EXEMPTIVE
RELIEF PURSUANT TO SECTION 36 OF THE EXCHANGE ACT
AGENCY: Securities and Exchange Commission
ACTION: Final Rule
SUMMARY: The Securities and Exchange Commission is amending its Rules of
General Application to set forth procedures to be followed by the Divisions
of Market Regulation and Corporation Finance in assessing and processing
applications for exemptive relief pursuant to Section 36 of the Securities
Exchange Act of 1934. Section 36 requires the Commission to determine the
procedures under which an exemptive order under that section may be
granted.
EFFECTIVE DATE: [Insert date of publication in the Federal Register].
FOR FURTHER INFORMATION CONTACT: Catherine McGuire, Chief Counsel, or Paul
P. Andrews, Special Counsel at (202) 942-0073, Office of Chief Counsel,
Division of Market Regulation, Mail Stop 7-11; or Anita Klein, Special
Counsel at (202) 942-2900, Office of Chief Counsel, Division of Corporation
Finance, Mail Stop 3-3, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION:
I. BACKGROUND
The National Securities Markets Improvement Act of 1996 ("NSMIA")
added Section 36 to the Securities Exchange Act of 1934 ("Exchange Act").
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<(1)> This section gives the Securities and Exchange Commission
("Commission") the authority to exempt any person, security, or transaction
from the provisions of the Exchange Act. The Commission has similar
authority under the Trust Indenture Act of 1939 (15 U.S.C. 77ddd(d)), the
Investment Company Act of 1940 (15 U.S.C. 80a-6(c)), and the Investment
Advisers Act of 1940 (15 U.S.C. 80b-6(a)). In particular, Section 36(a)(1)
provides that "the Commission by rule, regulation, or order, may
conditionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision or provisions of [the Exchange Act] or any
rule or regulation thereunder, to the extent that such exemption is
necessary or appropriate in the public interest, and is consistent with the
protection of investors." 15 U.S.C. 78mm(a). <(2)>
Before the Commission may begin using its new order authority, it must
develop procedures that applicants must follow in seeking such an exemption
from provisions of the Exchange Act. Accordingly, the Commission is
amending its Rules of General Application to set forth the following
procedures pursuant to which it will consider applications for these
exemptive orders. These procedures are similar to those now used by the
Commission in considering exemptive order applications under the Trust
<(1)> P.L. No. 104-290, 110 Stat. 3442.
<(2)> The Commission also has authority to issue exemptive
orders that grant relief from specific provisions of
the Exchange Act as well as from specific Commission
rules promulgated thereunder. For example, either by
rule or by order, the Commission may, pursuant to
Section 15(a)(2) of the Exchange Act, conditionally or
unconditionally exempt any broker or dealer from the
registration provisions of Section 15(a)(1).
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Indenture Act (see 17 CFR 260.4d-7; 260.4d-8), the Investment Company Act
(see 17 CFR 270.0-2; Investment Company Act Release No. 14492 (April 30,
1985)); and the Investment Advisers Act (see 17 CFR 275.0-5). Applicants
should also be aware, however, that under Section 36(a)(2), the Commission
has sole discretion to decline to consider any application.
Some provisions under the Exchange Act give the Commission specific
authority to provide exemptions. <(3)> In those areas, the Commission
intends to continue to consider exemptive requests under the specific
exemptive provisions. Under general exemptive authority, the Division of
Corporation Finance will evaluate on a case-by-case basis any requests for
exemptive relief it receives. With respect to areas of the Exchange Act
administered by the Division of Market Regulation <(4)> where the
Exchange Act does not provide specific exemptive authority, the Commission
currently views two areas as appropriate for requests for exemptive relief
under Section 36: (1) requests made under Section 11(d)(1) of the Exchange
Act, which prohibits broker-dealers from extending, arranging, or
maintaining credit on a new issue the broker-dealer is distributing and for
thirty days thereafter; and (2) requests made under the various statutory
<(3)> For example, Section 12(h) of the Exchange Act permits
the Commission to exempt certain persons, or classes of
persons, from the provisions of Sections 12(g), 13, 14,
15(d), and 16.
<(4)> The Division of Corporation Finance is responsible for
administering various sections of the Exchange Act,
including provisions of Sections 10A, 12, 13, 14,
15(d), 16, and 21E. The Division of Market Regulation
administers other provisions of the Exchange Act,
including Sections 6, 11, 15, 17 and 19. The Division
of Investment Management administers Section 13(f) of
the Exchange Act and that Division follows certain
other procedures in considering exemptive applications.
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and regulatory requirements otherwise imposed on a broker or dealer by
Sections 15 and 17 of the Exchange Act, if such broker or dealer has
received an exemption from the Commission from the registration provisions
of Section 15. <(5)>
II. AMENDMENT TO RULES OF GENERAL APPLICATION
The Commission today announces an amendment to its Rules of General
Application governing procedures to be followed for filing application for
exemptive orders pursuant to Section 36 of the Exchange Act. The amendment
adds new Rule 240.0-12 which sets forth the general procedures.
The Commission finds, in accordance with Section 553(b)(3)(A) of the
Administrative Procedure Act, 5 U.S.C. 553(b)(3)(A), that these rules
relate to agency organization, procedure, or practice, an agency
interpretation, and a general statement of policy. Accordingly, notice,
opportunity for public comment, and publication of these procedures and
guidelines prior to their effective date are unnecessary.
List of Subjects in 17 CFR Part 240
Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.
For the reasons set out in the preamble, Title 17, Chapter II, Part
240 of the Code of Federal Regulations is amended as follows:
PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
1. The general authority citation for Part 240 is revised to read as
follows:
<(5)> See, e.g., Exchange Act Section 15(c)(3) and the rules
thereunder.
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Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l, 78m, 78n,
78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 78mm, 79q, 79t, 80a-20, 80a-
23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
2. Section 240.0-12 is added to read as follows:
240.0-12 Commission procedures for filing applications for orders
for exemptive relief under Section 36 of the Exchange Act.
(a) The application shall be in writing in the form of a letter, must
include any supporting documents necessary to make the application
complete, and otherwise must comply with 240.0-3. All applications must
be submitted to the Office of the Secretary of the Commission. Requestors
may seek confidential treatment of their applications to the extent
provided under 200.81 of this chapter. If an application is incomplete,
the Commission, through the Division handling the application, may request
that the application be withdrawn unless the applicant can justify, based
on all the facts and circumstances, why supporting materials have not been
submitted and undertakes to submit the omitted materials promptly.
(b) An applicant may submit a request electronically in standard
electronic mail text or ASCII format. The electronic mailbox to use for
these applications is described on the Commission's website at www.sec.gov
in the "Exchange Act Exemptive Applications" subsection located under the
"Current SEC Rulemaking" section. In the event electronic mailboxes are
revised in the future, applicants can find the appropriate mailbox by
accessing the Commission's website directory of electronic mailboxes at
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http://www.sec.gov/asec/mailboxs.htm.
(c) An applicant also may submit a request in paper format. Five
copies of every paper application and every amendment to such an
application must be submitted to the Office of the Secretary at 450 Fifth
Street, N.W., Washington, D.C. 20549. Applications must be on white paper
no larger than 8-1/2 by 11 inches in size. The left margin of applications
must be at least 1-1/2 inches wide, and if the application is bound, it
must be bound on the left side. All typewritten or printed material must
be on one side of the paper only and must be set forth in black ink so as
to permit photocopying.
(d) Every application (electronic or paper) must contain the name,
address and telephone number of each applicant and the name, address, and
telephone number of a person to whom any questions regarding the
application should be directed. The Commission will not consider
hypothetical or anonymous requests for exemptive relief. Each applicant
shall state the basis for the relief sought, and identify the anticipated
benefits for investors and any conditions or limitations the applicant
believes would be appropriate for the protection of investors. Applicants
should also cite to and discuss applicable precedent. (e)
Amendments to the application should be prepared and submitted as set forth
in these procedures and should be marked to show what changes have been
made.
(f) After the filing is complete, the applicable Division will review
the application. Once all questions and issues have been answered to the
satisfaction of the Division, the staff will make an appropriate
recommendation to the Commission. After consideration of the
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recommendation by the Commission, the Commission's Office of the Secretary
will issue an appropriate response and will notify the applicant. If the
application pertains to a section of the Exchange Act pursuant to which the
Commission has delegated its authority to the appropriate Division, the
Division Director or his or her designee will issue an appropriate response
and notify the applicant.
(g) The Commission, in its sole discretion, may choose to publish in
the Federal Register a notice that the application has been submitted. The
notice would provide that any person may, within the period specified
therein, submit to the Commission any information that relates to the
Commission action requested in the application. The notice also would
indicate the earliest date on which the Commission would take final action
on the application, but in no event would such action be taken earlier than
25 days following publication of the notice in the Federal Register.
(h) The Commission may, in its sole discretion, schedule a hearing on
the matter addressed by the application.
By the Commission.
Jonathan G. Katz
Secretary
Dated: February 5, 1998
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