On November 25, 2014, the SEC issued a temporary order indicating that it had determined to grant the application of Bank of America and certain of its affiliates for an exemption from the disqualification provisions of Section 9(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Section 9(a) of the 1940 Act, in relevant part, disqualifies any person (and any company of which such person is an affiliated person under the 1940 Act) who, by reason of any misconduct, is permanently or temporarily enjoined from acting as an underwriter, broker, dealer or investment adviser, from serving as an employee, officer, director, member of an advisory board or investment adviser of a registered investment company or principal underwriter for any registered open-end company. According to published reports, however, certain SEC Commissioners continue to resist granting requests for such waivers, which the SEC has routinely granted in the past. Instead, these Commissioners have reportedly urged that the waiver process be viewed as a separate punishment that should be administered in a manner to serve as an additional deterrent to future misconduct.2 This debate among the Commissioners is reported to have recently resurfaced in connection with a private meeting to decide whether to grant the waivers requested by Bank of America, who applied for such waivers as part of its settlement with U.S. regulators covering claims stemming from the 2008 financial crisis involving certain mortgage securities.
This development is noteworthy in that it highlights the increasingly significant role that regulatory waivers (including waivers of disqualifications from service as an investment company director, officer, adviser or principal underwriter) may play in future SEC settlements.