SEC Rejects Exemptive Order Hearing Request

S&P’s Request regarding Vanguard’s application is denied.

By John M. Baker, Esq.

When the SEC is ready to grant an exemptive order under the Investment Company Act of 1940, it first issues a notice in which it states that an order granting the application will be issued unless the Commission orders a hearing and that interested persons may request a hearing. Actual hearing requests are rare. Recently, however, Standard & Poor’s submitted a hearing request on Vanguard’s application for an exemptive order that essentially would allow Vanguard to issue its new VIPERs class of exchange-traded fund shares.

S&P stated that it had filed suit against Vanguard concerning the use of S&P indices and trademarks in connection with the issuance of VIPERs and argued that it is not in the public interest for the SEC to grant the requested exemptions when Vanguard’s right to issue VIPERs is being challenged in litigation.

The SEC published in the Federal Register its rejection of the hearing request and its order granting the requested exemptions. Vanguard Index Funds, Release No. IC-24789, 65 Fed. Reg. 79439 (Dec. 12, 2000).

The Commission determined that the litigation is not relevant to the issues the 1940 Act requires it to consider in deciding whether to grant or deny the application. The litigation does not relate to or challenge any of the specific exemptions requested by Vanguard, nor does the litigation assert any claims under the 1940 Act.

The SEC also concluded that S&P’s other issues raised in the hearing request were not relevant to the relief requested or had already been addressed. The SEC noted that it was not necessary to determine whether S&P was an “interested person” entitled to request a hearing, inasmuch as S&P’s assertions and issues raised did not warrant a hearing. Federal Register documents are available at

Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, To subscribe to FundLaw, send a blank e-mail to

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.