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SEC Issues Guidance Regarding Compliance with Exemptive Orders

The SEC issued an Investment Management Guidance Update warning investment advisers and mutual funds that receive and rely upon exemptive orders that they are at risk of violating the federal securities laws if they fail to comply with the representations and conditions of their orders. The SEC noted that the consequences of non-compliance may be severe. The SEC suggested that investment advisers and mutual funds adopt and implement policies and procedures that are reasonably designed to ensure ongoing compliance with each representation and condition of an SEC exemptive order. For example, a fund may have received an order that includes conditions relating to board review. The fund could consider adopting a specific policy or procedure to address the required board review. Alternatively, the fund could consider whether an existing policy or procedure relating to board review of other matters would incorporate the specific board review required by the order.

The guidance follows a June 2011 report from the Office of Inspector General that detailed certain examples of firms that failed to comply with the representations and conditions of exemptive orders and made recommendations intended to enhance the SEC's oversight of compliance with representations and conditions in exemptive orders.

Source: IM Guidance Update No. 2013-02 (May 2013).

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume III, Number 197


About this Author

Chris Cahlamer Investment Management Attorney

Chris Cahlamer is the team leader of the firm’s Investment Management Practice Group, where he practices in investment management and securities law, focusing on investment companies, investment advisers, regulatory examinations, new product development, SEC compliance and reporting obligations, CCO support, private fund formation and operation, investment company reorganizations, investment advisor mergers and acquisitions, and general corporate and board fiduciary issues.

Chris earned his law degree, summa cum laude, at Marquette University Law School. While there, he...

Carol A. Gehl, Securities Law Attorney, Godfrey and Kahn law firm

Carol Gehl is a shareholder and the team leader of the Securities Practice Group in the Milwaukee office.

Carol’s practice is focused on investment management entities, including mutual funds, hedge funds, investment advisers and broker-dealers throughout the nation. During the last number of years, Carol has facilitated the organization of numerous mutual funds, hedge funds and investment advisers; assisted in SEC and FINRA examinations of regulated entities; provided ongoing advice to mutual fund Boards of Directors; and assisted with several mergers of investment advisers and reorganizations of mutual funds.

Susan Hoaglund, Investment Management Attorney, Godfrey Kahn law firm

Susan Hoaglund is a member of the Investment Management Practice Group. Susan provides advice to investment advisers, investment companies, broker-dealers and banks regarding legal, regulatory and compliance matters.