©2006 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.
[19947]
April 10, 2006
TO: BROKER/DEALER ADVISORY COMMITTEE No. 16-06
BANK, TRUST AND RECORDKEEPING ADVISORY COMMITTEE No. 14-06
OPERATIONS MEMBERS No. 10-06
SMALL FUNDS MEMBERS No. 29-06
SEC RULES MEMBERS No. 34-06
TRANSFER AGENT ADVISORY COMMITTEE No. 28-06
TECHNOLOGY ADVISORY COMMITTEE No. 8-06
RE: ICI COMMENT LETTER ON THE SEC'S PROPOSED REVISIONS TO THE
REDEMPTION FEE RULE
As we previously informed you, the Securities and Exchange Commission recently published
for comment its long-expected amendments to Rule 22c-2, the redemption fee rule.* The amendments
are intended to address concerns that came to the Commission’s attention through comments it
received when it adopted Rule 22c-2 in March 2005. The amendments: (1) exclude small nominee
accounts from the definition of “financial intermediary;” (2) address the rule’s application to “chain of
intermediary” situations; and (3) clarify the consequence of a financial intermediary not executing the
required “shareholder information agreement” with the fund. The Release also sought comment on
whether the rule’s original compliance date of October 16, 2006, which remains in effect, should be
revised or extended. The Institute’s comment letter, which is attached, is summarized below.
The Institute’s letter strongly supports the proposed revisions. It recommends that the
Commission extend the rule’s compliance date six months from the later of October 16, 2006 (the
current compliance date) or the date the proposed amendments to the rule are adopted. As discussed in
the letter, this extension is necessary for funds and their intermediaries to implement the rule,
particularly the provisions requiring shareholder information agreements to be executed.
* See Mutual Fund Redemption Fees, SEC Release No. IC-27255 (Feb. 28, 2006) (the “Release”). The Release is available on
the SEC’s website at: http://www.sec.gov/rules/proposed/ic-27255.pdf.
2
The letter also recommends that the Commission close an inadvertent gap in the rule. In
particular, we recommend that the Commission revise the rule’s definition of “financial intermediary”
to include any person that, on behalf of a financial intermediary, submits purchase or sale orders
directly to the fund. This revision will assure that funds have access, through a shareholder information
agreement, to a financial intermediary’s trading data without regard to whether the intermediary
submits orders to the fund directly or through another entity that transacts business directly with the
fund on the intermediary’s behalf.
The letter seeks clarification of two issues raised by the rule. The first relates to the
requirement that financial intermediaries implement any instructions from a fund to restrict or
prohibit purchases of fund shares. The letter recommends that the Commission clarify that, as used in
the rule, the term “purchase” does not include automatic dividend reinvestments. The second issue
relates to a financial intermediary’s duty to provide to a fund, upon request, a shareholder’s taxpayer
identification number (TIN). In recognition of the fact that foreign shareholders may not have TINs,
the letter recommends that the Commission permit the use of another unique, government-issued
identifier in lieu of a TIN, such as an individual taxpayer identification number (ITIN).
Tamara K. Salmon
Senior Associate Counsel
Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website
(http://members.ici.org) and search for memo 19947, or call the ICI Library at (202) 326-8304 and request the attachment
for memo 19947.
Attachment (in .pdf format)