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October 29, 1999
TO: CLOSED-END INVESTMENT COMPANY COMMITTEE No. 38-99
RE: DRAFT ICI COMMENT LETTER ON NYSE’S AND AMEX’S AUDIT
COMMITTEE PROPOSALS
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As you know, the New York Stock Exchange, the American Stock Exchange and Nasdaq have
proposed amendments to their audit committee rules. Attached is a draft of the ICI’s comment letter on
those proposals.
The ICI’s letter opposes the application of the proposals to closed-end funds for several reasons.
First, the proposals are intended to address abuses that have been cited in connection with financial
reporting of public operating companies. Closed-end funds are fundamentally different from public
operating companies and the potential for abuses the proposals are intended to address does not exist in
the context of closed-end funds. Second, the stringent regulation that closed-end funds are subject to
under the Investment Company Act of 1940 provide similar protections to those included in the
proposals. Finally, the SEC just recently proposed significant rules relating to investment company
directors, including a rule, Rule 32a-4, that focuses on audit committees.
The letter recommends that if it is determined that closed-end funds should be subject to
enhanced audit committee requirements, they should be subject only to the requirements under proposed
Rule 32a-4. The letter also comments on some of the specific requirements of the proposals.
Comments are due to the SEC on the proposals by November 3, 1999. Please provide any
comments that you have on the ICI’s draft letter by November 1 to the undersigned or to Greg Smith.
My direct number is 202/326-5824 and my e-mail address is amy@ici.org. Greg can be reached at
202/326-5851 or by e-mail at smith@ici.org.
Amy B.R. Lancellotta
Senior Counsel
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