ICI LETTER TO SEC REQUESTING REDUCED ACCOUNTING SUPPORT FEE RATE FOR REGISTERED INVESTMENT COMPANIES

[15489] December 23, 2002 TO: ACCOUNTING/TREASURERS COMMITTEE No. 57-02 CLOSED-END INVESTMENT COMPANY COMMITTEE No. 58-02 SEC RULES COMMITTEE No. 109-02 UNIT INVESTMENT TRUST COMMITTEE No. 34-02 RE: ICI LETTER TO SEC REQUESTING REDUCED ACCOUNTING SUPPORT FEE RATE FOR REGISTERED INVESTMENT COMPANIES Section 109 of the Sarbanes-Oxley Act authorizes the Public Company Accounting Oversight Board and the Financial Accounting Standards Board to assess “accounting support fees” on issuers to fund their operations. Section 109 requires that accounting support fees be based on each issuer’s average monthly equity market capitalization, provided that fees assessed may differentiate among classes of issuers in order to ensure their equitable allocation. The Institute recently sent the attached letter to the Securities and Exchange Commission recommending that registered investment companies be recognized as a separate class of issuers and that they be assessed accounting support fees at lower rates than operating companies. The Institute recommended that registered investment companies be assessed accounting support fees at ten percent of the rate at which operating companies are assessed. The ten percent rate is based on a comparison of (1) audit fees paid by investment companies (in relation to their net assets) and (2) audit fees paid by operating companies (in relation to their market capitalization). The letter indicates that the Institute’s recommendation is premised on the fact that the PCAOB and the FASB will likely devote substantially less time and resources to investment company matters than they will to operating company matters, due to (1) the relatively simple and straightforward accounting and auditing processes applicable to investment companies, and (2) the overlay of substantive Investment Company Act regulation of funds, combined with periodic on-site inspections by Commission staff. The letter also notes that the legislative history regarding Section 109 specifically supports the notion of a lower fee rate for registered investment companies. Gregory M. Smith Director - Operations/Compliance & Fund Accounting Attachment (in .pdf format)