March 16, 1990
TO: CLOSED-END FUND MEMBERS NO. 12-90
OPERATIONS MEMBERS NO. 9-90
SEC RULES MEMBERS NO. 22-90
ACCOUNTING/TREASURERS MEMBERS NO. 8-90
RE: INSTITUTE MEETING WITH STAFF CONCERNING GENERIC COMMENT
LETTER
__________________________________________________________
The Institute recently met with members of the SEC's
Division of Investment Management to discuss certain items in the
Division's generic comment letter about which members expressed
concern. (See Memorandum to SEC Rules Members No. 4-90,
Accounting/Treasurers Members No. 2-90, Closed-End Fund Members
No. 1-90 and Operations Members No. 3-90, dated January 19,
1990.) Set forth below is a summary of those items discussed at
the meeting which the staff clarified or on which they had
suggestions for resolving.
1. A concern was raised by members about the length of the time
period for receiving comments on a post-effective amendment that
is adding a new series to a fund. The staff responded that they
cannot commit to giving comments on post-effective amendments
adding a new series more quickly than they are currently doing
so. The staff noted that they have no mechanism for determining
which post-effectives are adding new series to enable the staff
to review them first and that they are under substantial time
constraints during post-effective amendment season. However, the
staff recommended that funds could possibly shorten the review
process by either filing a new registration statement, instead of
a post-effective amendment, when adding a new series or by filing
a post-effective amendment at a time other than during the post-
effective amendment season.
2. Several members were unclear from the staff's letter whether
counsel's representation as to the eligibility of the filing to
rely on subparagraph (b) of Rule 485 had to be included on the
signature page. The staff clarified that counsel's represen-
tation does not have be included on the signature page.
3. The staff agreed that the requirement to include a copy of
the fund's annual report in each filing, if the financial
statements are incorporated therein by reference, is
inappropriate for filings made on the EDGAR system.
4. With respect to the required undertaking by a fund to hold a
meeting of public shareholders within one year from the date of
commencement of operations, the staff stated that if a fund is
not able to comply with this undertaking, relief should be
requested from the Chief Accountant in the Division's Office of
Disclosure and Review. In its request, the fund must state the
basis on which it is requesting relief.
5. We commented that risk factors should not be required to be
disclosed in a separate section since the risks may be
overemphasized if they are not discussed along with the fund's
investment techniques. We therefore stated that it was more
appropriate to discuss risk factors in the section of the
prospectus describing the fund's investment techniques. In
response, the staff expressed a general concern about the
sufficiency of current disclosure of risk factors and is
therefore requiring funds to disclosure risk factors in a
separate section under the heading "Risk Factors." However, the
staff stated that funds may list the factors up front in the
prospectus and include a more detailed discussion of them in the
section describing the fund's investment techniques.
6. The staff clarified that disclosure concerning account
transfers only should be made where there are restrictions on
transferability between broker/dealer street name accounts.
Otherwise, no disclosure should be made.
Amy B. Rosenblum
Assistant General Counsel