[12035]
June 20, 2000
TO: ADVERTISING COMPLIANCE ADVISORY COMMITTEE No. 21-00
SEC RULES COMMITTEE No. 91-00
RE: ICI COMMENT LETTER ON SEC ELECTRONIC MEDIA RELEASE
The Institute recently filed the attached 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.1 The
comment letter, which is substantially similar to the draft letter previously circulated to you, is briefly
summarized below. 2
The comment 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 third-party information or to sales literature does not automatically make the
third-party information or sales literature become part of the prospectus; and (2) when material on a fund
web site outside of a prospectus would be considered “impermissible” free writing.
The letter also: (1) notes that Congress has passed legislation that will apply detailed consent
requirements to most electronic disclosure documents, and that the Institute is studying the legislation’s
impact on the Commission’s guidance in this area and may have further comments at a later date; (2)
recommends that the existing paper back-up delivery requirement be eliminated for electronic-only
offerings; (3) 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; (4) 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 (5) requests clarification that neither a fund nor its principal underwriter
would have liability under the federal securities laws for third-party information posted on a fund’s online
bulletin board in certain circumstances.
1 See Memorandum to Advertising Compliance Advisory Committee No. 15-00 and SEC Rules Committee No. 68-00, dated May
3, 2000 (transmitting SEC Release Nos. 33-7856, 34-42728, IC-24426 (April 28, 2000) (“Release”).
2 See Memorandum to Advertising Compliance Advisory Committee No. 19-00 and SEC Rules Committee No. 83-00, dated June
6, 2000.
2Doretha VanSlyke Zornada
Assistant Counsel
Attachment
Attachment (in .pdf format)