1 See Memorandum to Accounting/Treasurers Committee No. 27-98, Compliance Advisory Committee No. 18-98, Internal
Audit Committee No. 6-98, Investment Advisers Committee No. 24-98, Operations Committee No. 26-98, SEC Rules
Committee No. 68-98, and Transfer Agent Advisory Committee No. 37-98, dated July 6, 1998 (investment adviser rule
proposal).
2 See Memorandum to Accounting/Treasurers Members No. 18-98, Compliance Advisory Committee No. 19-98, Internal
Audit Committee No. 7-98, Investment Advisers Committee No. 26-98, Operations Committee No. 27-98, SEC Rules
Committee No. 73-98, and Transfer Agent Advisory Committee No. 41-98, dated July 14, 1998 (attestation request for
additional comment).
[10153]
July 28, 1998
TO: ACCOUNTING/TREASURERS COMMITTEE No. 32-98
COMPLIANCE ADVISORY COMMITTEE No. 21-98
INTERNAL AUDIT COMMITTEE No. 9-98
INVESTMENT ADVISERS COMMITTEE No. 27-98
OPERATIONS COMMITTEE No. 31-98
SEC RULES COMMITTEE No. 74-98
TRANSFER AGENT ADVISORY COMMITTEE No. 45-98
RE: ICI DRAFT COMMENT LETTERS ON SEC YEAR 2000 RULE PROPOSALS
____________________________________________________________________________
Attached are drafts of the Institute’s comment letters on the Securities and Exchange
Commission’s recent Year 2000 rule proposals. The first letter comments on the SEC’s proposed rules
regarding Year 2000 readiness report filings by registered investment advisers.1 The second letter
responds to the SEC’s request for additional comment on their proposed attestation requirement for
non-bank transfer agents and certain broker-dealers.2 The draft comment letters are attached and are
summarized below.
Comments on the investment adviser rule proposal and the attestation request for additional
comment are due to the SEC on Monday, August 10, 1998 and Wednesday, August 12, 1998,
respectively. The Institute intends to file both letters on August 10th. Please provide any comments
on these draft letters to me by Wednesday, August 5, 1998. You may reach me by phone at (202) 326-5923, by
fax at (202) 326-5839, or by e-mail at simmonbe@ici.org.
Investment Adviser Rule Proposal
The Institute’s draft letter generally supports the investment adviser rule proposal and notes our
appreciation that the proposed rule would not require an attestation report prepared by an independent
public accountant. The letter focuses primarily on Part II of proposed new Form ADV-Y2K, which
applies to registered investment advisers to registered investment companies, and recommends certain
modifications to it to make it more workable. In particular, the letter recommends that Part II be
tailored specifically to apply to investment companies. It notes that this is necessary because investment
companies typically do not have their own management information systems, Year 2000 plan, dedicated
computer systems, contingency plan, or employees. The letter notes our concern that many of the
questions in Part II may go unanswered because technically they do not apply to the investment
2company, or the responses given may merely replicate the responses given in Part I to the form.
The letter also recommends that the instructions to Part II be revised to reflect that primary
responsibility for completing and filing the form rests with the fund’s investment adviser or sponsor.
This is in recognition of the limited role that sub-advisers have in fund management. The letter indicates
that to impose primary responsibility on a sub-adviser to one fund to complete and file these reports for
all funds in the same fund complex would be unreasonable. The letter also comments on the facsimile
filing requirement, and requests guidance on the consequences for late filings, particularly if a filing is
late because of heavy volume on the Commission’s facsimile machine or because some other
communication glitch occurs.
Attestation Request for Additional Comment
The Institute’s draft letter expresses our appreciation that the recently-adopted rules for Year
2000 readiness reporting requirement for non-bank transfer agents and certain broker-dealers do not
impose an attestation requirement, as was originally proposed. The letter focuses on the Commission’s
request for comment on the feasibility or desirability of an “agreed-upon procedures” engagement, as
was suggested by the American Institute of Certified Public Accountants (AICPA).
The letter notes our concern that this approach may not provide added value in reinforcing the
Year 2000 compliance efforts of transfer agents and broker-dealers. The letter discusses the inherent
limitations of an agreed-upon procedures engagement -- namely that it is not designed to provide
assurances as to the adequacy or effectiveness of any of the procedures performed, which, in the context
of a Year 2000 engagement, means that an independent public accountant would not provide any
assurance that a non-bank transfer agent or a broker-dealer is or will be Year 2000 compliant, that the
registrant’s remediation plan would be successful, or that any party doing business with it will be Year
2000 compliant. Without these assurances, the letter questions whether this approach would provide
any added value to the present Year 2000 reporting scheme.
Finally, the letter notes that the specific procedures have not yet been determined and should be
applied consistently among all non-bank transfer agents and broker-dealers so as to ensure that the
results of the review would be subject to consistent evaluation by the Commission. The letter adds that
if the SEC decides to pursue this approach, despite its shortcomings, there should be an opportunity to
comment on any specific procedures before they are adopted.
Barry E. Simmons
Assistant Counsel
Attachments