SEC PROPOSES RULE TO ALLOW PURCHASES BY REGISTERED INVESTMENT COMPANIES OF SECURITIES OF FOREIGN BANKS AND FOREIGN INSURANCE COMPANIES

July 31, 1989 TO: SEC RULES COMMITTEE NO. 43-89 CLOSED-END FUND COMMITTEE NO. 30-89 UNIT INVESTMENT TRUST COMMITTEE NO. 40-89 INTERNATIONAL FUNDS TASK FORCE NO. 8-89 RE: SEC PROPOSES RULE TO ALLOW PURCHASES BY REGISTERED INVESTMENT COMPANIES OF SECURITIES OF FOREIGN BANKS AND FOREIGN INSURANCE COMPANIES __________________________________________________________ The SEC has issued a proposed rule that would remove restrictions on registered investment companies purchasing securities of foreign banks and foreign insurance companies. (A copy of the release is attached.) Currently, foreign banks and foreign insurance companies may fall within the scope of the definition of "investment company" under the 1940 Act. Section 12(d)(1)(A) of the 1940 Act imposes limitations on the purchase by registered investment companies of shares of other investment companies. Proposed Rule 12d1-1 would exempt foreign banks and foreign insurance companies from the definition of "investment company" for purposes of Section 12(d)(1)(A). The rule would apply to both debt and equity securities, although it would only apply to direct obligations of the foreign bank or insurance company and not to trusts, separate accounts or other entities organized by the bank or insurance company. In addition, acquisitions of securities of foreign insurance companies would have to be in compliance with Section 12(d)(2) of the 1940 Act, which imposes limitations on the acquisition of securities of domestic insurance companies by registered investment companies. Rule 12d1-1 would apply to foreign banks that meet the definition under Rule 6c-9 under the 1940 Act. Two alternatives are proposed for the definition of foreign insurance company. Each would require that the issuer be regulated as an insurance company by the appropriate government and engaged in the type of activities specified in Section 3(a)(8) of the 1933 Act. One alternative would contain additional language to clarify the types of agreements that may constitute the primary business of the foreign insurance company. A meeting has been scheduled for August 29, 1989 at 10:00 a.m. in the offices of the Institute to discuss the proposed rule. If you plan to attend the meeting, please call Marie Stanley at 202/955-3524. Craig S. Tyle Assistant General Counsel Attachment