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).