May 16, 1989
TO: STATE LIAISON COMMITTEE NO. 8-89
RE: MEETING WITH NASAA'S REGULATED INDUSTRIES COORDINATION
COMMITTEE
__________________________________________________________
On April 6, 1989, staff members of the Institute and Lee
Augsberger, Van Kampen Merritt, a member of the State Securities
Committee, met with NASAA's Regulated Industries Coordination
Committee. Committee Chairperson, Ellyn Brown of the Maryland
Division of Securities, invited the Institute to discuss the
regulation and operation of the mutual fund industry with the
Committee. The Institute reviewed the substantive requirements
under the Investment Company Act of 1940 and briefly highlighted
the requirements under other federal securities laws for mutual
funds. In addition, the Institute described the responsibilities
and functions of a fund's directors/trustees, investment adviser,
underwriter and custodian.
During the meeting, the Committee discussed their concerns
with an apparent increasing number of mutual funds that fail to
renew their annual registration on a timely basis. As a result
of repeated late renewal problems, the Committee indicated that
some states are assessing substantial fines and penalties against
such funds. The Committee is concerned that the fines and
penalties are being paid from assets of the funds.
The Institute stated that it is unaware of any fund using
its assets to pay a fine or penalty, however, we indicated our
willingness to work with the Committee to develop an appropriate
solution to the problem. In addition, the Institute urged the
Committee to encourage the states to review the facts and
circumstances of each instance of late renewal before assessing a
fine or penalty.
We will keep you informed of developments.
Natalie S. Shirley
Associate General Counsel