April 24, 1989
TO: BOARD OF GOVERNORS NO. 27-89
SEC RULES MEMBERS NO. 23-89
CLOSED-END FUND COMMITTEE NO. 12-89
FEDERAL LEGISLATION COMMITTEE NO. 6-89
UNIT INVESTMENT TRUST COMMITTEE NO. 20-89
RE: INSTITUTE COMMENTS ON PROPOSED LEGISLATION TO REGULATE
TELEMARKETING ACTIVITIES
__________________________________________________________
Earlier this year, Representative Thomas Luken (D-OH),
Chairman of the Energy and Commerce Subcommittee with
jurisdiction over the Federal Trade Commission, introduced the
"Telemarketing Fraud Prevention Act of 1989" (H.R. 1354). The
bill would give the Federal Trade Commission the power to
regulate telemarketing activities, including those involving
securities, in the same manner as it regulates door-to-door
sales.
H.R. 1354 would also give the Federal Trade Commission,
state attorney generals and private persons the power to bring a
civil action against a person "who engages in telemarketing which
is a fraudulent act or practice" or which is in violation of the
rules adopted by the FTC. In addition, the Federal Trade
Commission or state attorney generals could bring a civil action
against a person who engages "in any conduct the natural
consequence of which is to harass, oppress, or abuse any person
in connection with" telemarketing. Abusive behavior would
include "the placement of telephone calls without meaningful
disclosure of the caller's identity."
You may recall that in 1972 the Federal Trade Commission
proposed to require a "cooling-off" period for door-to-door
sales. The proposed rule would have required a person who sold
goods or services door-to-door to refund the sales price upon
request for up to three days after the sale. Because the
proposed rule could have been interpreted to apply to sales of
investment company shares and other securities, the Institute
requested an exemption in the final rule for "transactions in
securities or commodities accounts by a broker-dealer registered
with the Securities and Exchange Commission." The rule as
adopted specified that the term "door-to-door sale" in the rule
did not apply to transactions pertaining to the "sale of
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securities or commodities by a broker-dealer registered with the
Securities and Exchange Commission."
Similarly, with respect to H.R. 1354, the Institute, in a
letter to Chairman Luken and other members of the Committee, has
requested that H.R. 1354 "be amended to grant an exemption for
actions or claims arising out of federal or state securities laws
for sales of investment company shares by registered broker-
dealers." The Institute's request parallels that of SEC Chairman
Ruder, who in recent testimony expressed the agency's support for
a securities industry exemption.
Copies of the Institute letter and the bill are enclosed.
We will keep you informed of developments.
Matthew P. Fink
Senior Vice President
and General Counsel
Attachments