[15481]
December 20, 2002
TO: ACCOUNTING/TREASURERS COMMITTEE No. 56-02
CLOSED-END INVESTMENT COMPANY COMMITTEE No. 57-02
INVESTMENT ADVISERS COMMITTEE No. 32-02
SEC RULES COMMITTEE No. 108-02
SMALL FUNDS COMMITTEE No. 22-02
UNIT INVESTMENT TRUST COMMITTEE No. 33-02
RE: DRAFT INSTITUTE LETTER ON SEC PROPOSAL ON AUDITOR RECORDS
As we previously informed you,1 the Securities and Exchange Commission has issued a
release requesting comments on a proposed rule implementing the requirements in Section 802
of the Sarbanes-Oxley Act. While the proposed rule relates primarily to auditor record
retention, the Commission requested comment on its application to investment companies and
investment advisers. The Institute’s draft comment letter on the proposal is attached and
summarized below.
Comments on the proposed rule must be received by the SEC no later than December 27,
2002. If you have any comments on the Institute’s draft letter, please provide them to the
undersigned via e-mail (smith@ici.org) by December 26.
The proposing release requests comment on whether the Commission should exercise its
authority under Section 32(c) of the Investment Company Act to require independent
accountants’ records related to audits of investment companies be made available for inspection
by Commission staff. The Institute’s draft letter supports this proposal, noting that such access
may enhance the efficiency and effectiveness of the Commission’s investment company
inspection program.
The Commission requests comment on whether issuers should be subject to record
retention requirements, including retaining records that the independent accountant reviewed
but did not include in its workpapers. The Institute’s draft letter notes that investment
company issuers are already subject to extensive record keeping and record retention
requirements. Moreover, to the extent the Commission requires independent accountants to
1 Memorandum to Accounting/Treasurers Committee No. 52-02, Closed-End Investment Company Committee No.
47-02, Investment Advisers Committee No. 28-02, SEC Rules Committee No. 96-02, Small Funds Committee No. 20-
02, Unit Investment Trust Committee No. 26-02, dated November 26, 2002.
2
make their records available for inspection, any such issuer record retention requirement would
be duplicative and unnecessary.
Finally, the Institute’s comment letter recommends that the proposal not be applied to
audits of investment advisers. The Institute’s letter notes that an investment adviser’s balance
sheet is not particularly meaningful to fund investors and that the Commission omitted the
requirement that advisers to mutual funds provide a certified balance sheet in connection with
shareholder approval of an investment advisory contract.
Gregory M. Smith
Director - Operations/Compliance & Fund
Accounting
Attachment (in .pdf format)