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October 18, 1989
TO: SEC RULES MEMBERS NO. 59-89
STATE SECURITIES MEMBERS NO. 35-89
CLOSED-END FUND MEMBERS NO. 57-89
UNIT INVESTMENT TRUST MEMBERS NO. 56-89
RE: CALIFORNIA PROPOSED ANTI-APARTHEID DISCLOSURE REGULATIONS
__________________________________________________________
As we previously informed you, voters in California
approved a proposition last year that requires, effective January
1, 1990, all corporations issuing securities in California to
include disclosure in their prospectuses of "whether or not" that
corporation (or any affiliated corporation) does business in
South Africa, or with any person or group located in South
Africa. (See Memorandum to SEC Rules Members No. 25-89, State
Securities Members No. 16-89, Closed-End Fund Members No. 20-89
and Unit Investment Trust Members No. 25-89, dated May 4, 1989.)
On October 12, the office of the California Secretary of
State issued proposed regulations relating to the proposition,
copies of which are attached. The regulations would require each
corporation selling securities in California to file a notice
that attaches photocopies of the required prospectus disclosure,
as well as the cover page of the prospectus. The regulations
also describe the notice form.
There are certain provisions of the proposed regulations of
special interest to investment companies. Investment companies
organized as business trusts are exempt from the disclosure
requirements, as the proposition only covers corporations. In
addition, the proposed regulations specify that a mutual fund
need not consider whether its sponsor nor whether corporations in
which it invests are doing business in South Africa in order to
determine whether it is doing business in South Africa. Mutual
funds are also not considered to be subsidiaries of their
sponsors.
The proposed regulations also specify the exact disclosure
that should appear in prospectuses of corporations selling shares
in California. For those that do not do business in South Africa
the prospectus should state: "This corporation does not do
business in, and does not do business with any person or group
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located in, South Africa". "Company" may be substituted for
"corporation".
Comments on the proposed regulations are due December 5.
We will keep you informed of developments.
Craig S. Tyle
Associate General Counsel
Attachment