(The article featured below is a selection from SEC Today, which is available to subscribers of that publication.)

SEC Adopts Mandatory EDGAR Filing for Investment Company Applications

The SEC has adopted amendments to its rules to require the mandatory electronic submission of applications for orders under the Investment Company Act. The amendments also require small business investment companies and business development companies to electronically file under Regulation E. The temporary hardship exemption will not be available for these submissions. The SEC also amended rule 0-2 to eliminate the requirement that certain documents be notarized and that applicants must submit a draft notice as an exhibit to the application (Rel. No. 33-8981, October 29, 2008).

The amendments were proposed last November. Only two comment letters were submitted in response. Both commenters supported the proposal as a way to efficiently transmit and retrieve applications. The electronic filings will also help the staff track and process exemptive applications. Investors will have more timely access to the information.

Both commenters questioned the process for submitting applications in draft form. In the past, the staff has considered certain exemptive applications in draft form and has granted confidential treatment where appropriate, in order to encourage innovation in the fund industry. One commenter complimented the process for rewarding innovation and allowing the creator company to be first to the market with a new product or practice.

The other commenter felt that draft applications were "contrary to fundamental principles of administrative law and the public interest." This commenter said it was unfair to other applicants that properly filed their applications but have to wait while the staff reviews draft applications. The commenter urged the SEC not to accept or review draft applications and to address any confidentiality requests by redacting proprietary information.

The SEC noted that the staff policy is to review draft applications only in the most extraordinary situations. The staff plans to continue to accept draft applications only where the applicant clearly demonstrates that extraordinary circumstances call for that approach, according to the release. The SEC believes that this approach strikes the appropriate balance by encouraging innovation in the fund industry, making effective use of resources and serving the public interest. The SEC does not believe that the number of draft applications will increase in light of the electronic filing mandate.

The SEC did not propose to require that applications under the Investment Advisers Act be made on EDGAR. Any documents that are intended as applications under both the Investment Company and the Investment Advisers Acts must be submitted separately under each Act. The staff did not find any applications over the past 10 years that sought relief from the provisions of both Acts, so did not believe it was cost-effective to make a programming change to EDGAR to accept applications under both Acts.

Requests for confidential treatment must be made on paper. Amendments and related correspondence and supplemental information must be submitted on EDGAR. Upon the effective date, January 1, 2009, amendments to paper filings must be filed on EDGAR. There were no comments on the transition period. The SEC concluded that applicants will be prepared to submit their applications on the effective date.

Most applicants will submit their applications under submission type 40-APP and 40-APP/A for amendments. The other categories of filings include 40-OIP and 40-OIP/A for insurance products and 40-6B and 40-6B/A for employees' securities company applications. EDGAR will route the applications to the appropriate office for review.

The SEC also issued a small entity compliance guide to instruct small business investment companies and business development companies on the submission of applications for orders under the amended rules.