* See Memorandum to Advertising Compliance Advisory Committee, No. 15-00 and SEC Rules Committee No. 68-00, date
May 3, 2000 (transmitting SEC Release Nos. 33-7856, 34-42728, IC-24426 (April 28, 2000) ("Release").
[11930]
June 6, 2000
TO: ADVERTISING COMPLIANCE ADVISORY COMMITTEE No. 19-00
SEC RULES COMMITTEE No. 83-00
RE: DRAFT ICI COMMENT LETTER ON SEC ELECTRONIC MEDIA RELEASE
______________________________________________________________________________
Attached for your review is a draft of the Institute’s comment letter on the Securities and
Exchange Commission’s interpretive release providing additional guidance on the application of the
federal securities laws to the use of electronic media by securities issuers, including investment
companies.* The draft letter is briefly summarized below. Please note that in several places within the
letter we have asked members for specific examples we could include in the letter to help illustrate our
positions. We would appreciate your suggestions in this regard.
Comments on the Release must be filed with the Commission by June 19th. Please provide
your comments on the draft letter by Monday, June 12th to Frances Stadler (by phone at 202/326-
5822; fax at 202/326-5827; or e-mail at frances@ici.org) or Dore Zornada (by phone at 202/326-5819;
fax at 202/326-5839; or e-mail at dvanslyke@ici.org).
The draft letter supports the Commission’s goals underlying the release, but states that in the
case of mutual funds, the new “guidance” it provides falls far short of these goals. The letter indicates
that the Release increases the uncertainty about and barriers to the use of electronic media by mutual
funds, in part by focusing on typical corporate issuers without giving adequate attention to unique
considerations for mutual funds. In particular, the letter expresses disappointment with the guidance in
the Release concerning responsibility for
third-party information to which a mutual fund establishes a hyperlink, and recommends that the
Commission revisit this issue and work with the NASD and the industry to establish objective criteria
that mutual funds may rely on in this area. The letter also criticizes the Release’s discussion of the so-
called “envelope theory” (which deals with when electronically delivered documents are considered to be
delivered together for purposes of the federal securities laws), because it creates problems and
ambiguities for mutual funds. The letter therefore seeks clarification of several issues, including: (1) that
a hyperlink from a fund prospectus to sales literature does not make the sales literature become part of
the prospectus; (2) that the inclusion of an inactive third-party URL address in a fund prospectus does
not make the third-party web site part of the prospectus; and (3) when material on a fund web site
outside of a prospectus would be considered impermissible free writing.
The letter also: (1) recommends that the requirements for obtaining informed consent to
electronic delivery of disclosure documents be streamlined; (2) encourages the Commission to take a
forward-looking approach to reliance on implied consent; (3) requests clarification concerning the use of
an electronic notice of the availability of a Rule 10b-10 confirmation; (4) recommends that the existing
paper back-up delivery requirement be eliminated for
electronic-only offerings; (5) recommends that historical material that is archived and labeled as such on
a fund web site should not be deemed republished each day or when accessed by an investor; (5)
requests clarification that live online auditoriums are oral communications that do not need to be filed
pursuant to Section 24(b) of the Investment Company Act; and (6) requests clarification that neither a
fund nor its principal underwriter would have liability under the federal securities laws for information
posted on a fund’s online bulletin board in certain circumstances.
Doretha VanSlyke Zornada
Assistant Counsel
Attachment