February 5, 1990
TO: STATE SECURITIES MEMBERS NO. 1-90
RE: TEXAS BANK/FINANCIAL INSTITUTION DISCLOSURE
__________________________________________________________
The Institute has been informed by the Texas State
Securities Board that it is concerned that banks and other
financial institutions involved in the distribution of
investment company securities may be acting as "dealers" as
defined in the Texas Securities Act without being registered as
such and is requiring additional disclosure in fund disclosure
documents. Unlike the majority of states that except "banks"
from the definition of "dealer," banks are not excepted from the
definition of "dealer" in the Texas Securities Act.
Texas is requiring that the following language be inserted
after the Glass-Steagall disclosure in a fund's prospectus or the
Statement of Additional Information ("SAI"), or in the case where
there is no Glass-Steagall disclosure, after the disclosure on
the participation of banks/financial institutions in the
distribution process:
In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein
and banks and financial institutions may be required to
register as dealers pursuant to state law.
Texas has been reviewing initial applications, renewal
applications and amendments at the time of filing to determine if
the above disclosure must be included in a fund's prospectus or
SAI. If a fund is renewing or amending its registration
statement and receives a comment from Texas regarding the role of
banks/financial institutions in the distribution process, sales
need not be discontinued and the fund may assume that the renewal
and/or amendment is effective on the date the filing was received
by the Texas Securities Board. However, an official Permit will
not be issued until the comment item is resolved.
If a fund agrees to include the requested disclosure in the
prospectus or SAI, Texas will accept an undertaking that the
disclosure will be included in the next printing of the
prospectus or SAI rather than having to reprint or sticker the
prospectus immediately.
We will keep you informed of other developments.
Patricia Louie
Assistant General Counsel
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