CFA CENTRE FOR FINANCIAL MARKET INTEGRITY EXPOSURE DRAFT OF ASSET MANAGER CODE OF PROFESSIONAL CONDUCT - 12/16/04 CONFERENCE CALL

[18322] December 10, 2004 TO: CHIEF COMPLIANCE OFFICER COMMITTEE No. 33-04 CLOSED-END INVESTMENT COMPANY COMMITTEE No. 46-04 COMPLIANCE ADVISORY COMMITTEE No. 118-04 EQUITY MARKETS ADVISORY COMMITTEE No. 51-04 INVESTMENT ADVISERS COMMITTEE No. 20-04 SEC RULES COMMITTEE No. 97-04 SMALL FUNDS COMMITTEE No. 52-04 RE: CFA CENTRE FOR FINANCIAL MARKET INTEGRITY EXPOSURE DRAFT OF ASSET MANAGER CODE OF PROFESSIONAL CONDUCT - 12/16/04 CONFERENCE CALL The CFA Centre for Financial Market Integrity1 has issued for public comment an exposure draft of an Asset Manager Code of Professional Conduct (“Code”).2 The Code sets forth minimum standards for providing asset management services to clients. According to the exposure draft, the Code “is meant to apply to firms . . . who manage client assets as separate accounts or pooled funds (including mutual funds).” An overview of the contents of the exposure draft is provided below. Comments on the exposure draft are due by December 31st. We will hold a conference call on Thursday, December 16th at 4:00 p.m. Eastern time to discuss whether the Institute should submit comments and, if so, what issues the comments should address. The dial-in number for the call is 888/381-5770 and the pass code is CFA/Stadler. Please send an email to Monica Carter-Johnson at mcarter@ici.org to let us know if you plan to participate on the call. The exposure draft begins with six “General Principles of Conduct” that describe responsibilities of asset management firms to their clients (e.g., act in a professional and ethical manner at all times). These principles are followed by the “Asset Manager Code of Conduct,” which covers six areas: (1) loyalty to clients; (2) investment process and actions; (3) trading; (4) compliance and support; (5) performance and valuation; and (6) disclosure. For each of these areas, the Code includes a series of directives regarding specific conduct in which firms “must” (or must not) engage. Finally, there is a set of “Recommendations and Guidance” relating to each of the directives in the Code. 1 The CFA Centre for Financial Market Integrity was formed by the CFA Institute (formerly, the Association for Investment Management and Research, or AIMR). 2 The exposure draft is available at http://www.cfainstitute.org/cfacentre/positions/pdf/asset_manager_code.pdf. 2 In the case of investment advisers to mutual funds, many of the items addressed in the exposure draft are the subject of specific requirements under the federal securities laws. One potential area for Institute comment, therefore, would be to highlight any inconsistencies between provisions in the Code and applicable legal requirements (e.g., regarding valuation of client holdings). We plan to discuss this topic and any other concerns about the exposure draft on the December 16th conference call. Frances M. Stadler Deputy Senior Counsel