[Federal Register Volume 63, Number 32 (Wednesday, February 18, 1998)]
[Rules and Regulations]
[Pages 8101-8103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3931]
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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.
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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: February 18, 1998.
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'').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
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\1\ Pub. 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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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
[[Page 8102]]
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 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 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
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\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.
\5\ See, e.g., Exchange Act Section 15(c)(3) and the rules
thereunder.
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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:
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:
Sec. 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 Sec. 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 Sec. 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 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 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
[[Page 8103]]
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.
Dated: February 5, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3931 Filed 2-17-98; 8:45 am]
BILLING CODE 8010-01-P
