©2005 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete.
Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice.
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December 15, 2005
TO: BOARD OF GOVERNORS No. 65-05
CLOSED-END INVESTMENT COMPANY MEMBERS No. 64-05
COMPLIANCE MEMBERS No. 27-05
INVESTMENT ADVISER MEMBERS No. 25-05
PRIMARY CONTACTS - MEMBER COMPLEX No. 50-05
SEC RULES MEMBERS No. 126-05
SMALL FUNDS MEMBERS No. 100-05
UNIT INVESTMENT TRUST MEMBERS No. 26-05
INVESTMENT COMPANY DIRECTORS No. 29-05
RE: INSTITUTE PAPER ON COMPLIANCE TESTING FOR CHIEF COMPLIANCE
OFFICERS
Attached is the Institute’s paper on compliance testing, which is designed to assist Chief
Compliance Officers (“CCOs”) and others in meeting the review and reporting requirements for
fund compliance programs under Rule 38a-1 of the Investment Company Act of 1940. The
paper discusses, among other things, the process for planning annual reviews, the options
available for conducting compliance testing, and considerations for preparing annual reports to
fund boards. The paper is part of the Institute’s continuing efforts to assist CCOs in developing
effective and practical approaches to complying with Rule 38a-1. The paper may also be helpful
to fund directors in their interactions with and oversight of fund CCOs.
Given the vast differences among member firms, the paper is not intended to provide a
“one size fits all” approach or serve as a set of “best practices.” Rather, the paper is intended to
provide firms the flexibility to design and carry out compliance reviews in a manner that
reflects their particular operations.
If you have any questions or comments regarding the paper or related issues, please
contact Barry Simmons at (202) 326-5923 or Amy Lancellotta at (202) 326-5824.
Elizabeth R. Krentzman
General Counsel
Attachment