April 20, 1989
TO: UNIT INVESTMENT TRUST MEMBERS NO. 24-89
RE: INSTITUTE COMMENTS ON SEC PROPOSED AMENDMENTS TO
SECTION 16 RULES
__________________________________________________________
In December, the SEC proposed a number of substantive
changes to the rules under section 16 of the Securities Exchange
Act of 1934. Under that statutory provision, a beneficial owner
of more than ten percent of any class of equity security
registered under section 12 of the Exchange Act is treated as an
insider subject to the reporting obligations of section 16(a) and
the short swing profit recovery rules of section 16(b).
The proposed rules include a new two part definition for
determining beneficial ownership. Either or both of these
proposed rules could be interpreted to attribute more than ten
percent beneficial ownership to sponsors of unit investment
trusts investing in equities. Under the first proposed rule, a
unit trust sponsor could be deemed to be a more than ten percent
beneficial owner of a specific security pursuant to an
attribution analysis under section 13(d) of the Exchange Act.
The second test could attribute to a unit trust sponsor ownership
of any security in which he were deemed to have a direct or
indirect pecuniary interest.
In the attached comment letter, the Institute requests
clarification of the proposed rules relating to the determination
of ten percent beneficial ownership to exclude from attribution
to a UIT sponsor those shares held by a unit trust or a
discretionary account managed by the sponsor in the ordinary
course of his business, provided that the shares were not
acquired for the purpose of influencing or exercising control.
In addition, the letter requests clarification of the rules to
provide that a unit trust sponsor does not have a sufficient
pecuniary interest in the securities held by a unit trust to be
deemed their beneficial owner.
We will keep you informed of developments.
Catherine L. Heron
Deputy General Counsel
Attachment