December 26, 1989
TO: UNIT INVESTMENT TRUST COMMITTEE NO. 87-89
RE: LETTER TO FDIC REGARDING PASS-THROUGH OF DEPOSIT INSURANCE
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As you know, the Institute has submitted a comment letter
to the FDIC in connection with its study of pass-through
insurance for individual investors in unit investment trusts and
qualified pension plans. (See Institute memo to Unit Investment
Trust Members No. 54-89). The attached letter was also sent to
the FDIC following a meeting with FDIC staff to discuss the
policy rationale underlying the grant of pass-through deposit
insurance in some instances but not in others.
As noted in the letter, we were unable to determine a
consistent rationale for the FDIC's pass-through policies.
Particularly in the case of investors in various pooled vehicles,
such as bank common and collective funds on one hand and
investment companies on the other, we found little justification
for the distinctions previously drawn.
The letter urges the FDIC to develop a more consistent
approach to functionally equivalent pooled vehicles. If
investors in bank-pooled funds are to continue to receive the
benefits of pass-through deposit insurance, the FDIC should also
extend pass-through insurance to investment companies investors.
We will keep you informed of developments.
Catherine L. Heron
Deputy General Counsel