SEC building (Photo: Diego Radzinschi/ALM)

The Securities and Exchange Commission has adopted an expedited applications review process.

In order to expedite the review of routine applications, the Commission adopted a final rule instituting amendments to rule 0-5 under the Investment Company Act, which sets forth the procedure for applications under the Act.

The rule is not meant to cover specific products. It covers all applications under the Investment Company Act — so primarily by mutual funds and business development companies (BDCs), as well as other entities like broker-dealers and advisors interacting with a mutual fund.

“These amendments establish an expedited review procedure for applications that are substantially identical to recent precedent,” the SEC states. “We believe that the approach we are adopting balances applicants’ desire for a prompt decision on their application with the Commission’s need for adequate time to consider requests for relief.”

Specifically, the SEC said that it’s adopting an expedited review process “for routine applications, an informal internal procedure for applications that would not qualify for the expedited process, and a rule to deem an application withdrawn when an applicant does not respond in writing to Staff comments within 120 days.”

The SEC “will speed review for applications that are substantially identical to two other orders granted within the last three years,” stated Cipperman Compliance Services in a note on the final rule. “Expedited review means that the SEC will take action within 45 days. The SEC has also set a 90-day internal deadline for exemptive applications outside of the expedited review.”

Cipperman said that with the final rule, the SEC has “responded to industry concerns about the sluggish exemptive application process that has hindered product development and created an uneven playing field.”

In its final rule, the SEC states that it is adopting the “substantially identical” standard largely as proposed.

“With the expedited process, we are seeking to create a new process that is both faster and more certain in its timing than the current process while maintaining sufficient time for the Staff to evaluate applications that may raise novel issues,” the SEC states.

“The ‘substantially identical standard’ accomplishes that because it makes the expedited procedure only available for applications that closely track precedent. In most cases under this standard, the Staff should be able to issue a notice within 45 days without issuing any comments to the applicant first,” the agency said.

The Investment Company Institute, the mutual fund trade group, “is very pleased the SEC adopted these expedited procedures because they will help reduce the burdens of what is sometimes a time-consuming process for funds,” an ICI spokeswoman told ThinkAdvisor in a Thursday email message.

The new regulation “provides much-needed clarity for funds” and “will help foster innovation in the industry,” ICI said.